Correlation Between Macys and Goodheart Willcox

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

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

Diversification Opportunities for Macys and Goodheart Willcox

-0.3

Correlation Coefficient

Macys  Goodheart Willcox

Very good diversification

The 3 months correlation between Macys and Goodheart is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and The Goodheart Willcox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodheart Willcox 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 Goodheart Willcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodheart Willcox has no effect on the direction of Macys i.e., Macys and Goodheart Willcox go up and down completely randomly.

Pair Corralation between Macys and Goodheart Willcox

Taking into account the 90-day investment horizon Macys Inc is expected to generate 0.95 times more return on investment than Goodheart Willcox. However, Macys Inc is 1.05 times less risky than Goodheart Willcox. It trades about 0.08 of its potential returns per unit of risk. The Goodheart Willcox is currently generating about 0.03 per unit of risk. If you would invest  1,470  in Macys Inc on September 25, 2024 and sell it today you would earn a total of  154.00  from holding Macys Inc or generate 10.48% return on investment over 90 days.

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

Macys Inc  vs.  The Goodheart Willcox

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 unfluctuating primary indicators, Macys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goodheart Willcox

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days The Goodheart Willcox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Goodheart Willcox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Macys and Goodheart Willcox

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

The idea behind Macys Inc and The Goodheart Willcox 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.