Correlation Between Macys and Pet Center

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

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

Diversification Opportunities for Macys and Pet Center

-0.63

Correlation Coefficient

Macys  Pet Center

Excellent diversification

The 3 months correlation between Macys and Pet is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Pet Center Comrcio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Center Comrcio 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 Pet Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Center Comrcio has no effect on the direction of Macys i.e., Macys and Pet Center go up and down completely randomly.

Pair Corralation between Macys and Pet Center

Assuming the 90 days trading horizon Macys Inc is expected to generate 0.55 times more return on investment than Pet Center. However, Macys Inc is 1.81 times less risky than Pet Center. It trades about 0.18 of its potential returns per unit of risk. Pet Center Comrcio is currently generating about -0.03 per unit of risk. If you would invest  8,178  in Macys Inc on September 26, 2024 and sell it today you would earn a total of  2,122  from holding Macys Inc or generate 25.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Macys Inc  vs.  Pet Center Comrcio

Macys Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Macys sustained solid returns over the last few months and may actually be approaching a breakup point.

Pet Center Comrcio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pet Center Comrcio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Macys and Pet Center

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

The idea behind Macys Inc and Pet Center Comrcio 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.