Correlation Between Macys and United Airlines

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Can any of the company-specific risk be diversified away by investing in both Macys and United Airlines 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 United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and United Airlines Holdings, you can compare the effects of market volatilities on Macys and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and United Airlines.

Diversification Opportunities for Macys and United Airlines

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Macys and United is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Macys i.e., Macys and United Airlines go up and down completely randomly.

Pair Corralation between Macys and United Airlines

Assuming the 90 days horizon Macys is expected to generate 1.07 times less return on investment than United Airlines. But when comparing it to its historical volatility, Macys Inc is 1.36 times less risky than United Airlines. It trades about 0.21 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,506  in United Airlines Holdings on September 15, 2024 and sell it today you would earn a total of  894.00  from holding United Airlines Holdings or generate 10.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Macys Inc  vs.  United Airlines Holdings

 Performance 
       Timeline  
Macys Inc 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Macys reported solid returns over the last few months and may actually be approaching a breakup point.
United Airlines Holdings 

Risk-Adjusted Performance

31 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Macys and United Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Macys and United Airlines

The main advantage of trading using opposite Macys and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.
The idea behind Macys Inc and United Airlines Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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