Correlation Between Macys and Companhia Brasileira

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

By analyzing existing cross correlation between Macys Inc and Companhia Brasileira de, you can compare the effects of market volatilities on Macys and Companhia Brasileira 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 Companhia Brasileira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Companhia Brasileira.

Diversification Opportunities for Macys and Companhia Brasileira

-0.28

Correlation Coefficient

Macys  Companhia Brasileira

Very good diversification

The 3 months correlation between Macys and Companhia is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Companhia Brasileira de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Brasileira 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 Companhia Brasileira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Brasileira has no effect on the direction of Macys i.e., Macys and Companhia Brasileira go up and down completely randomly.

Pair Corralation between Macys and Companhia Brasileira

Taking into account the 90-day investment horizon Macys Inc is expected to generate 0.66 times more return on investment than Companhia Brasileira. However, Macys Inc is 1.51 times less risky than Companhia Brasileira. It trades about -0.08 of its potential returns per unit of risk. Companhia Brasileira de is currently generating about -0.48 per unit of risk. If you would invest  1,963  in Macys Inc on January 25, 2024 and sell it today you would lose (89.00) from holding Macys Inc or give up 4.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Macys Inc  vs.  Companhia Brasileira de

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.

Companhia Brasileira

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Brasileira de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Macys and Companhia Brasileira

The main advantage of trading using opposite Macys and Companhia Brasileira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Companhia Brasileira 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 Companhia Brasileira will offset losses from the drop in Companhia Brasileira's long position.

The idea behind Macys Inc and Companhia Brasileira de 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..