Correlation Between Macys and Ford
Can any of the company-specific risk be diversified away by investing in both Macys and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and Ford Motor, you can compare the effects of market volatilities on Macys and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Ford.
Diversification Opportunities for Macys and Ford
Very weak diversification
The 3 months correlation between Macys and Ford is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Macys i.e., Macys and Ford go up and down completely randomly.
Pair Corralation between Macys and Ford
Taking into account the 90-day investment horizon Macys Inc is expected to under-perform the Ford. In addition to that, Macys is 1.06 times more volatile than Ford Motor. It trades about -0.2 of its total potential returns per unit of risk. Ford Motor is currently generating about -0.14 per unit of volatility. If you would invest 1,290 in Ford Motor on January 20, 2024 and sell it today you would lose (84.00) from holding Ford Motor or give up 6.51% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Macys Inc vs. Ford Motor
Performance |
Timeline |
Macys Inc |
Ford Motor |
Macys and Ford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Macys and Ford
The main advantage of trading using opposite Macys and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.Macys vs. Marks Spencer Group | Macys vs. Marks and Spencer | Macys vs. Dillards Capital Trust | Macys vs. Companhia Brasileira de |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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