Correlation Between Macys and JC Penney

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

Diversification Opportunities for Macys and JC Penney

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Macys and JCP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and J C Penney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J C Penney 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 JC Penney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J C Penney has no effect on the direction of Macys i.e., Macys and JC Penney go up and down completely randomly.

Pair Corralation between Macys and JC Penney

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]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Macys Inc  vs.  J C Penney

 Performance 
       Timeline  
Macys Inc 

Risk-Adjusted Performance

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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.
J C Penney 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days J C Penney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, JC Penney is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Macys and JC Penney Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Macys and JC Penney

The main advantage of trading using opposite Macys and JC Penney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, JC Penney 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 JC Penney will offset losses from the drop in JC Penney's long position.
The idea behind Macys Inc and J C Penney 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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