Correlation Between Tesla and Macys

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

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

Diversification Opportunities for Tesla and Macys

0.85

Correlation Coefficient

Tesla  Macys

Very poor diversification

The 3 months correlation between Tesla and Macys is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Tesla 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 Tesla Inc are associated (or correlated) with Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Tesla i.e., Tesla and Macys go up and down completely randomly.

Pair Corralation between Tesla and Macys

Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.68 times more return on investment than Macys. However, Tesla is 1.68 times more volatile than Macys Inc. It trades about 0.35 of its potential returns per unit of risk. Macys Inc is currently generating about 0.22 per unit of risk. If you would invest  6,250  in Tesla Inc on September 24, 2024 and sell it today you would earn a total of  1,809  from holding Tesla Inc or generate 28.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Tesla Inc  vs.  Macys Inc

Tesla Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Macys Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Macys sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Macys

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

The idea behind Tesla Inc and Macys Inc 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.