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 2.56 times less return on investment than Macys. But when comparing it to its historical volatility, Microsoft is 2.93 times less risky than Macys. It trades about 0.16 of its potential returns per unit of risk. Macys Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,113 in Macys Inc on January 19, 2024 and sell it today you would earn a total of 788.00 from holding Macys Inc or generate 70.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.19% |
| 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. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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