Correlation Between Macys and Bread Financial
Can any of the company-specific risk be diversified away by investing in both Macys and Bread Financial 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 Bread Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and Bread Financial Holdings, you can compare the effects of market volatilities on Macys and Bread Financial 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 Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Bread Financial.
Diversification Opportunities for Macys and Bread Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Macys and Bread is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial 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 Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Macys i.e., Macys and Bread Financial go up and down completely randomly.
Pair Corralation between Macys and Bread Financial
Assuming the 90 days trading horizon Macys is expected to generate 1.78 times less return on investment than Bread Financial. But when comparing it to its historical volatility, Macys Inc is 1.41 times less risky than Bread Financial. It trades about 0.17 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,435 in Bread Financial Holdings on September 24, 2024 and sell it today you would earn a total of 3,006 from holding Bread Financial Holdings or generate 46.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.41% |
Values | Daily Returns |
Macys Inc vs. Bread Financial Holdings
Performance |
Timeline |
Macys Inc |
Bread Financial Holdings |
Macys and Bread Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Macys and Bread Financial
The main advantage of trading using opposite Macys and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Bread Financial 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 Bread Financial will offset losses from the drop in Bread Financial's long position.Macys vs. Zoom Video Communications | Macys vs. HDFC Bank Limited | Macys vs. GP Investments | Macys vs. Bread Financial Holdings |
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Check out your portfolio center.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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