Correlation Between Microsoft and Macys
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Macys Inc, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Macys.
Diversification Opportunities for Microsoft and Macys
Very weak diversification
The 3 months correlation between Microsoft and Macys is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Macys go up and down completely randomly.
Pair Corralation between Microsoft and Macys
Given the investment horizon of 90 days Microsoft is expected to generate 0.42 times more return on investment than Macys. However, Microsoft is 2.37 times less risky than Macys. It trades about -0.24 of its potential returns per unit of risk. Macys Inc is currently generating about -0.2 per unit of risk. If you would invest 42,523 in Microsoft on January 20, 2024 and sell it today you would lose (2,096) from holding Microsoft or give up 4.93% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Microsoft vs. Macys Inc
Performance |
Timeline |
Microsoft |
Macys Inc |
Microsoft and Macys Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Macys
The main advantage of trading using opposite Microsoft and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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