Correlation Between Macys and Ollies Bargain

Can any of the company-specific risk be diversified away by investing in both Macys and Ollies Bargain at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Macys and Ollies Bargain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macys Inc and Ollies Bargain Outlet, you can compare the effects of market volatilities on Macys and Ollies Bargain and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Macys with a short position of Ollies Bargain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Ollies Bargain.

Diversification Opportunities for Macys and Ollies Bargain

0.62

Correlation Coefficient

Macys  Ollies Bargain

Poor diversification

The 3 months correlation between Macys and Ollies is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Ollies Bargain Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ollies Bargain Outlet and Macys is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Macys Inc are associated (or correlated) with Ollies Bargain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ollies Bargain Outlet has no effect on the direction of Macys i.e., Macys and Ollies Bargain go up and down completely randomly.

Pair Corralation between Macys and Ollies Bargain

Taking into account the 90-day investment horizon Macys is expected to generate 1.62 times less return on investment than Ollies Bargain. But when comparing it to its historical volatility, Macys Inc is 1.12 times less risky than Ollies Bargain. It trades about 0.07 of its potential returns per unit of risk. Ollies Bargain Outlet is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10,206  in Ollies Bargain Outlet on September 24, 2024 and sell it today you would earn a total of  1,585  from holding Ollies Bargain Outlet or generate 15.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Macys Inc  vs.  Ollies Bargain Outlet

Macys Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ollies Bargain Outlet

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ollies Bargain Outlet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady essential indicators, Ollies Bargain demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and Ollies Bargain

The main advantage of trading using opposite Macys and Ollies Bargain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Ollies Bargain can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ollies Bargain will offset losses from the drop in Ollies Bargain's long position.

The idea behind Macys Inc and Ollies Bargain Outlet pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.