Correlation Between Macys and PSQ Holdings

Can any of the company-specific risk be diversified away by investing in both Macys and PSQ Holdings 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 PSQ Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macys Inc and PSQ Holdings, you can compare the effects of market volatilities on Macys and PSQ Holdings 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 PSQ Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and PSQ Holdings.

Diversification Opportunities for Macys and PSQ Holdings

0.7

Correlation Coefficient

Macys  PSQ Holdings

Poor diversification

The 3 months correlation between Macys and PSQ is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and PSQ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSQ Holdings 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 PSQ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSQ Holdings has no effect on the direction of Macys i.e., Macys and PSQ Holdings go up and down completely randomly.

Pair Corralation between Macys and PSQ Holdings

Taking into account the 90-day investment horizon Macys is expected to generate 17.12 times less return on investment than PSQ Holdings. But when comparing it to its historical volatility, Macys Inc is 4.83 times less risky than PSQ Holdings. It trades about 0.01 of its potential returns per unit of risk. PSQ Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  997.00  in PSQ Holdings on September 28, 2024 and sell it today you would lose (533.00) from holding PSQ Holdings or give up 53.46% of portfolio value over 90 days.

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

Macys Inc  vs.  PSQ Holdings

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.

PSQ Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSQ Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, PSQ Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and PSQ Holdings

The main advantage of trading using opposite Macys and PSQ Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, PSQ Holdings 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 PSQ Holdings will offset losses from the drop in PSQ Holdings' long position.

The idea behind Macys Inc and PSQ Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.