Correlation Between Dillards and Macys

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

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

Diversification Opportunities for Dillards and Macys

0.58

Correlation Coefficient

Dillards  Macys

Very weak diversification

The 3 months correlation between Dillards and Macys is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dillards and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Dillards 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 Dillards 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 Dillards i.e., Dillards and Macys go up and down completely randomly.

Pair Corralation between Dillards and Macys

Considering the 90-day investment horizon Dillards is expected to generate 0.93 times more return on investment than Macys. However, Dillards is 1.07 times less risky than Macys. It trades about 0.04 of its potential returns per unit of risk. Macys Inc is currently generating about 0.0 per unit of risk. If you would invest  27,790  in Dillards on January 20, 2024 and sell it today you would earn a total of  13,053  from holding Dillards or generate 46.97% return on investment over 90 days.

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

Dillards  vs.  Macys Inc

Dillards

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Dillards is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Macys Inc

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 2 (%) 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.

Pair Trading with Dillards and Macys

The main advantage of trading using opposite Dillards and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dillards 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 Dillards 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.