Correlation Between Macys and Kohls Corp

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

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

Diversification Opportunities for Macys and Kohls Corp

-0.02

Correlation Coefficient

Macys  Kohls Corp

Good diversification

The 3 months correlation between Macys and Kohls is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Kohls Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohls Corp 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 Kohls Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohls Corp has no effect on the direction of Macys i.e., Macys and Kohls Corp go up and down completely randomly.

Pair Corralation between Macys and Kohls Corp

Taking into account the 90-day investment horizon Macys Inc is expected to generate 1.05 times more return on investment than Kohls Corp. However, Macys is 1.05 times more volatile than Kohls Corp. It trades about -0.03 of its potential returns per unit of risk. Kohls Corp is currently generating about -0.08 per unit of risk. If you would invest  1,978  in Macys Inc on January 28, 2024 and sell it today you would lose (135.00) from holding Macys Inc or give up 6.83% of portfolio value over 90 days.

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

Macys Inc  vs.  Kohls Corp

Macys Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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 current stock price disarray, may contribute to short-term losses for the investors.

Kohls Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohls Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Macys and Kohls Corp

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

The idea behind Macys Inc and Kohls Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.