Correlation Between Ross Stores and Macys
Can any of the company-specific risk be diversified away by investing in both Ross Stores 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 Ross Stores and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Macys Inc, you can compare the effects of market volatilities on Ross Stores 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 Ross Stores with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Macys.
Diversification Opportunities for Ross Stores and Macys
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ross and Macys is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and Macys go up and down completely randomly.
Pair Corralation between Ross Stores and Macys
Given the investment horizon of 90 days Ross Stores is expected to under-perform the Macys. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 2.21 times less risky than Macys. The stock trades about -0.05 of its potential returns per unit of risk. The Macys Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,614 in Macys Inc on October 13, 2024 and sell it today you would lose (30.00) from holding Macys Inc or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Macys Inc
Performance |
| Timeline |
| Ross Stores |
| Macys Inc |
Ross Stores and Macys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Macys
The main advantage of trading using opposite Ross Stores and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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.| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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