Correlation Between Macys and Pool

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

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

Diversification Opportunities for Macys and Pool

0.25

Correlation Coefficient

Macys  Pool

Modest diversification

The 3 months correlation between Macys and Pool is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of Macys i.e., Macys and Pool go up and down completely randomly.

Pair Corralation between Macys and Pool

Taking into account the 90-day investment horizon Macys is expected to generate 2.92 times less return on investment than Pool. In addition to that, Macys is 1.52 times more volatile than Pool Corporation. It trades about 0.01 of its total potential returns per unit of risk. Pool Corporation is currently generating about 0.03 per unit of volatility. If you would invest  29,338  in Pool Corporation on September 24, 2024 and sell it today you would earn a total of  5,135  from holding Pool Corporation or generate 17.5% return on investment over 90 days.

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

Macys Inc  vs.  Pool Corp.

Macys Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 5 (%) 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.

Pool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pool Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Macys and Pool

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

The idea behind Macys Inc and Pool Corporation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.