Correlation Between Walmart and Macys

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

Diversification Opportunities for Walmart and Macys

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Walmart and Macys is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Walmart 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 Walmart 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 Walmart i.e., Walmart and Macys go up and down completely randomly.

Pair Corralation between Walmart and Macys

Considering the 90-day investment horizon Walmart is expected to generate 2.11 times less return on investment than Macys. But when comparing it to its historical volatility, Walmart is 5.67 times less risky than Macys. It trades about 0.08 of its potential returns per unit of risk. Macys Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,978  in Macys Inc on December 29, 2023 and sell it today you would earn a total of  21.00  from holding Macys Inc or generate 1.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  Macys Inc

 Performance 
       Timeline  
Walmart 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.
Macys Inc 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Macys is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Walmart and Macys Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Macys

The main advantage of trading using opposite Walmart and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.
The idea behind Walmart and Macys 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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