Correlation Between Macys and East West
Can any of the company-specific risk be diversified away by investing in both Macys and East West 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 East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and East West Petroleum, you can compare the effects of market volatilities on Macys and East West 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 East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and East West.
Diversification Opportunities for Macys and East West
Very good diversification
The 3 months correlation between Macys and East is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and East West Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Petroleum 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 East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Petroleum has no effect on the direction of Macys i.e., Macys and East West go up and down completely randomly.
Pair Corralation between Macys and East West
Taking into account the 90-day investment horizon Macys is expected to generate 487.89 times less return on investment than East West. But when comparing it to its historical volatility, Macys Inc is 17.15 times less risky than East West. It trades about 0.01 of its potential returns per unit of risk. East West Petroleum is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6.00 in East West Petroleum on September 28, 2024 and sell it today you would lose (3.00) from holding East West Petroleum or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.39% |
| Values | Daily Returns |
Macys Inc vs. East West Petroleum
Performance |
| Timeline |
| Macys Inc |
| East West Petroleum |
Macys and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macys and East West
The main advantage of trading using opposite Macys and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.The idea behind Macys Inc and East West Petroleum 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.| East West vs. Valeura Energy | East West vs. Invictus Energy Limited | East West vs. ConnectOne Bancorp | East West vs. RCM Technologies |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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