Correlation Between Best Buy and Macys
Can any of the company-specific risk be diversified away by investing in both Best Buy 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 Best Buy and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and Macys Inc, you can compare the effects of market volatilities on Best Buy 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 Best Buy with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Macys.
Diversification Opportunities for Best Buy and Macys
Significant diversification
The 3 months correlation between Best and Macys is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and Macys go up and down completely randomly.
Pair Corralation between Best Buy and Macys
Considering the 90-day investment horizon Best Buy Co is expected to generate 0.47 times more return on investment than Macys. However, Best Buy Co is 2.15 times less risky than Macys. It trades about -0.14 of its potential returns per unit of risk. Macys Inc is currently generating about -0.28 per unit of risk. If you would invest 8,532 in Best Buy Co on October 22, 2024 and sell it today you would lose (342.00) from holding Best Buy Co or give up 4.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. Macys Inc
Performance |
| Timeline |
| Best Buy |
| Macys Inc |
Best Buy and Macys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Macys
The main advantage of trading using opposite Best Buy and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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 Best Buy Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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