Correlation Between Macys and Best Buy
Can any of the company-specific risk be diversified away by investing in both Macys and Best Buy 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 Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and Best Buy Co, you can compare the effects of market volatilities on Macys and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Best Buy.
Diversification Opportunities for Macys and Best Buy
Very weak diversification
The 3 months correlation between Macys and Best is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Macys i.e., Macys and Best Buy go up and down completely randomly.
Pair Corralation between Macys and Best Buy
Taking into account the 90-day investment horizon Macys Inc is expected to generate 2.0 times more return on investment than Best Buy. However, Macys is 2.0 times more volatile than Best Buy Co. It trades about 0.13 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.09 per unit of risk. If you would invest 1,149 in Macys Inc on January 25, 2024 and sell it today you would earn a total of 725.00 from holding Macys Inc or generate 63.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macys Inc vs. Best Buy Co
Performance |
| Timeline |
| Macys Inc |
| Best Buy |
Macys and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macys and Best Buy
The main advantage of trading using opposite Macys and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy'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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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