Correlation Between Alphabet and Macy
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Macy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Macy Inc, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Macy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Macy.
Diversification Opportunities for Alphabet and Macy
Very weak diversification
The 3 months correlation between Alphabet and Macy is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Macy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macy Inc and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Macy go up and down completely randomly.
Pair Corralation between Alphabet and Macy
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Macy. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.56 times less risky than Macy. The stock trades about -0.02 of its potential returns per unit of risk. The Macy Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,544 in Macy Inc on September 2, 2024 and sell it today you would earn a total of 62.00 from holding Macy Inc or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Macy Inc
Performance |
| Timeline |
| Alphabet Class C |
| Macy Inc |
Alphabet and Macy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Macy
The main advantage of trading using opposite Alphabet and Macy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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.| Macy vs. Coeur Mining | Macy vs. The Mercantile Investment | Macy vs. Silvercorp Metals | Macy vs. British American Tobacco |
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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