Correlation Between Macys and Arko Corp

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

Diversification Opportunities for Macys and Arko Corp

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Macys and Arko is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko Corp 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 Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of Macys i.e., Macys and Arko Corp go up and down completely randomly.

Pair Corralation between Macys and Arko Corp

Taking into account the 90-day investment horizon Macys Inc is expected to generate 1.07 times more return on investment than Arko Corp. However, Macys is 1.07 times more volatile than Arko Corp. It trades about 0.02 of its potential returns per unit of risk. Arko Corp is currently generating about -0.4 per unit of risk. If you would invest  1,978  in Macys Inc on December 29, 2023 and sell it today you would earn a total of  7.00  from holding Macys Inc or generate 0.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Macys Inc  vs.  Arko Corp

 Performance 
       Timeline  
Macys Inc 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Macys Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
Arko Corp 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Arko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Macys and Arko Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Macys and Arko Corp

The main advantage of trading using opposite Macys and Arko Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Arko Corp 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 Arko Corp will offset losses from the drop in Arko Corp's long position.
The idea behind Macys Inc and Arko Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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