Correlation Between Macy and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both Macy and Mercantile Investment 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 Macy and Mercantile Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macy Inc and The Mercantile Investment, you can compare the effects of market volatilities on Macy and Mercantile Investment 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 Macy with a short position of Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macy and Mercantile Investment.
Diversification Opportunities for Macy and Mercantile Investment
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Macy and Mercantile is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Macy Inc and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment and Macy 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 Macy Inc are associated (or correlated) with Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Macy i.e., Macy and Mercantile Investment go up and down completely randomly.
Pair Corralation between Macy and Mercantile Investment
Assuming the 90 days trading horizon Macy Inc is expected to generate 3.3 times more return on investment than Mercantile Investment. However, Macy is 3.3 times more volatile than The Mercantile Investment. It trades about 0.17 of its potential returns per unit of risk. The Mercantile Investment is currently generating about 0.05 per unit of risk. If you would invest 1,521 in Macy Inc on September 4, 2024 and sell it today you would earn a total of 162.00 from holding Macy Inc or generate 10.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Macy Inc vs. The Mercantile Investment
Performance |
| Timeline |
| Macy Inc |
| The Mercantile Investment |
Macy and Mercantile Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macy and Mercantile Investment
The main advantage of trading using opposite Macy and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macy position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.| Macy vs. Catalyst Media Group | Macy vs. CATLIN GROUP | Macy vs. RTW Venture Fund | Macy vs. Secure Property Development |
| Mercantile Investment vs. Sovereign Metals | Mercantile Investment vs. Iron Mountain | Mercantile Investment vs. European Metals Holdings | Mercantile Investment vs. Veolia Environnement VE |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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