Correlation Between ESSEX and Macys

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

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

Diversification Opportunities for ESSEX and Macys

-0.41

Correlation Coefficient

ESSEX  Macys

Very good diversification

The 3 months correlation between ESSEX and Macys is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ESSEX PORTFOLIO L and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and ESSEX 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 ESSEX PORTFOLIO L 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 ESSEX i.e., ESSEX and Macys go up and down completely randomly.

Pair Corralation between ESSEX and Macys

Assuming the 90 days trading horizon ESSEX PORTFOLIO L is expected to under-perform the Macys. But the bond apears to be less risky and, when comparing its historical volatility, ESSEX PORTFOLIO L is 5.17 times less risky than Macys. The bond trades about -0.22 of its potential returns per unit of risk. The Macys Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,577  in Macys Inc on September 25, 2024 and sell it today you would earn a total of  105.00  from holding Macys Inc or generate 6.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.19%
Values	Daily Returns

ESSEX PORTFOLIO L  vs.  Macys Inc

ESSEX PORTFOLIO L

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSEX PORTFOLIO L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESSEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Macys Inc

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESSEX and Macys

The main advantage of trading using opposite ESSEX and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSEX 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 ESSEX PORTFOLIO L 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.