Correlation Between Macys and Disney

Can any of the company-specific risk be diversified away by investing in both Macys and Disney 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 Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macys Inc and Walt Disney, you can compare the effects of market volatilities on Macys and Disney 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 Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Disney.

Diversification Opportunities for Macys and Disney

0.52

Correlation Coefficient

Macys  Disney

Very weak diversification

The 3 months correlation between Macys and Disney is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Macys i.e., Macys and Disney go up and down completely randomly.

Pair Corralation between Macys and Disney

Taking into account the 90-day investment horizon Macys Inc is expected to generate 1.87 times more return on investment than Disney. However, Macys is 1.87 times more volatile than Walt Disney. It trades about -0.08 of its potential returns per unit of risk. Walt Disney is currently generating about -0.17 per unit of risk. If you would invest  1,963  in Macys Inc on January 25, 2024 and sell it today you would lose (90.00) from holding Macys Inc or give up 4.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Macys Inc  vs.  Walt Disney

Macys Inc

Risk-Adjusted Performance

1 of 100

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 current stock price disarray, may contribute to short-term losses for the investors.

Walt Disney

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and Disney

The main advantage of trading using opposite Macys and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.

The idea behind Macys Inc and Walt Disney 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.