Correlation Between AutoNation and Macys

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

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

Diversification Opportunities for AutoNation and Macys

-0.6

Correlation Coefficient

AutoNation  Macys

Excellent diversification

The 3 months correlation between AutoNation and Macys is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and AutoNation 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 AutoNation 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 AutoNation i.e., AutoNation and Macys go up and down completely randomly.

Pair Corralation between AutoNation and Macys

Allowing for the 90-day total investment horizon AutoNation is expected to generate 0.81 times more return on investment than Macys. However, AutoNation is 1.23 times less risky than Macys. It trades about -0.17 of its potential returns per unit of risk. Macys Inc is currently generating about -0.19 per unit of risk. If you would invest  18,618  in AutoNation on December 4, 2024 and sell it today you would lose (1,080) from holding AutoNation or give up 5.8% of portfolio value over 90 days.

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

AutoNation  vs.  Macys Inc

AutoNation

Risk-Adjusted Performance

Very Weak

Over the last 90 days AutoNation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AutoNation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Macys Inc

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AutoNation and Macys

The main advantage of trading using opposite AutoNation and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation 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 AutoNation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.