Correlation Between Digital Brands and Macys

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

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

Diversification Opportunities for Digital Brands and Macys

-0.51

Correlation Coefficient

Digital Brands  Macys

Excellent diversification

The 3 months correlation between Digital and Macys is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Digital Brands 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 Digital Brands Group 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 Digital Brands i.e., Digital Brands and Macys go up and down completely randomly.

Pair Corralation between Digital Brands and Macys

Given the investment horizon of 90 days Digital Brands Group is expected to under-perform the Macys. In addition to that, Digital Brands is 7.33 times more volatile than Macys Inc. It trades about -0.14 of its total potential returns per unit of risk. Macys Inc is currently generating about 0.09 per unit of volatility. If you would invest  1,505  in Macys Inc on September 26, 2024 and sell it today you would earn a total of  177.00  from holding Macys Inc or generate 11.76% return on investment over 90 days.

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

Digital Brands Group  vs.  Macys Inc

Digital Brands Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Brands Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Macys Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital Brands and Macys

The main advantage of trading using opposite Digital Brands and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Brands 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 Digital Brands Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.