Correlation Between Macys and Barnes Noble

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

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

Diversification Opportunities for Macys and Barnes Noble

0.43

Correlation Coefficient

Macys  Barnes Noble

Very weak diversification

The 3 months correlation between Macys and Barnes is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Barnes Noble Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Noble Education 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 Barnes Noble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Noble Education has no effect on the direction of Macys i.e., Macys and Barnes Noble go up and down completely randomly.

Pair Corralation between Macys and Barnes Noble

Taking into account the 90-day investment horizon Macys is expected to generate 19.62 times less return on investment than Barnes Noble. But when comparing it to its historical volatility, Macys Inc is 2.0 times less risky than Barnes Noble. It trades about 0.01 of its potential returns per unit of risk. Barnes Noble Education is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  612.00  in Barnes Noble Education on September 29, 2024 and sell it today you would earn a total of  429.00  from holding Barnes Noble Education or generate 70.1% return on investment over 90 days.

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

Macys Inc  vs.  Barnes Noble Education

Macys Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

Barnes Noble Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Noble Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Barnes Noble exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and Barnes Noble

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

The idea behind Macys Inc and Barnes Noble Education 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.