Correlation Between Aarons and Macys

Can any of the company-specific risk be diversified away by investing in both Aarons 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 Aarons and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Aarons and Macys Inc, you can compare the effects of market volatilities on Aarons 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 Aarons with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons and Macys.

Diversification Opportunities for Aarons and Macys

-0.33

Correlation Coefficient

Aarons  Macys

Very good diversification

The 3 months correlation between Aarons and Macys is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Aarons 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 The Aarons 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 Aarons i.e., Aarons and Macys go up and down completely randomly.

Pair Corralation between Aarons and Macys

Considering the 90-day investment horizon The Aarons is expected to under-perform the Macys. In addition to that, Aarons is 1.12 times more volatile than Macys Inc. It trades about -0.03 of its total potential returns per unit of risk. Macys Inc is currently generating about 0.01 per unit of volatility. If you would invest  1,968  in Macys Inc on February 1, 2024 and sell it today you would lose (125.00) from holding Macys Inc or give up 6.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Aarons  vs.  Macys Inc

Aarons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Macys Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Macys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aarons and Macys

The main advantage of trading using opposite Aarons and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons 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 The Aarons 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.