Correlation Between Gamma Communications and Macy
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and Macy 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 Gamma Communications and Macy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and Macy Inc, you can compare the effects of market volatilities on Gamma Communications and Macy 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 Gamma Communications with a short position of Macy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Macy.
Diversification Opportunities for Gamma Communications and Macy
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gamma and Macy is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Macy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macy Inc and Gamma Communications 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 Gamma Communications PLC are associated (or correlated) with Macy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macy Inc has no effect on the direction of Gamma Communications i.e., Gamma Communications and Macy go up and down completely randomly.
Pair Corralation between Gamma Communications and Macy
Assuming the 90 days trading horizon Gamma Communications PLC is expected to under-perform the Macy. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications PLC is 1.75 times less risky than Macy. The stock trades about -0.37 of its potential returns per unit of risk. The Macy Inc is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 1,642 in Macy Inc on October 24, 2024 and sell it today you would lose (201.00) from holding Macy Inc or give up 12.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. Macy Inc
Performance |
| Timeline |
| Gamma Communications PLC |
| Macy Inc |
Gamma Communications and Macy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Macy
The main advantage of trading using opposite Gamma Communications and Macy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, Macy 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 Macy will offset losses from the drop in Macy's long position.The idea behind Gamma Communications PLC and Macy 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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