Correlation Between Disney and Macys
Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Macys Inc, you can compare the effects of market volatilities on Disney 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 Disney with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Macys.
Diversification Opportunities for Disney and Macys
Very weak diversification
The 3 months correlation between Disney and Macys is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Disney 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 Walt Disney 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 Disney i.e., Disney and Macys go up and down completely randomly.
Pair Corralation between Disney and Macys
Considering the 90-day investment horizon Walt Disney is expected to generate 0.58 times more return on investment than Macys. However, Walt Disney is 1.72 times less risky than Macys. It trades about 0.01 of its potential returns per unit of risk. Macys Inc is currently generating about 0.0 per unit of risk. If you would invest 11,313 in Walt Disney on January 21, 2024 and sell it today you would lose (52.00) from holding Walt Disney or give up 0.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Walt Disney vs. Macys Inc
Performance |
| Timeline |
| Walt Disney |
| Macys Inc |
Disney and Macys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Macys
The main advantage of trading using opposite Disney and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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.| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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