Correlation Between Torrid Holdings and Macys

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

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

Diversification Opportunities for Torrid Holdings and Macys

0.64

Correlation Coefficient

Torrid Holdings  Macys

Poor diversification

The 3 months correlation between Torrid and Macys is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Torrid Holdings and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Torrid Holdings 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 Torrid Holdings 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 Torrid Holdings i.e., Torrid Holdings and Macys go up and down completely randomly.

Pair Corralation between Torrid Holdings and Macys

Given the investment horizon of 90 days Torrid Holdings is expected to generate 0.97 times more return on investment than Macys. However, Torrid Holdings is 1.03 times less risky than Macys. It trades about 0.5 of its potential returns per unit of risk. Macys Inc is currently generating about -0.2 per unit of risk. If you would invest  427.00  in Torrid Holdings on October 16, 2024 and sell it today you would earn a total of  145.00  from holding Torrid Holdings or generate 33.96% return on investment over 90 days.

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

Torrid Holdings  vs.  Macys Inc

Torrid Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Torrid Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Torrid Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Macys Inc

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Torrid Holdings and Macys

The main advantage of trading using opposite Torrid Holdings and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torrid Holdings 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 Torrid Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.