Correlation Between Macys and ThredUp

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

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

Diversification Opportunities for Macys and ThredUp

0.02

Correlation Coefficient

Macys  ThredUp

Significant diversification

The 3 months correlation between Macys and ThredUp is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and ThredUp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThredUp 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 ThredUp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThredUp has no effect on the direction of Macys i.e., Macys and ThredUp go up and down completely randomly.

Pair Corralation between Macys and ThredUp

Taking into account the 90-day investment horizon Macys Inc is expected to under-perform the ThredUp. But the stock apears to be less risky and, when comparing its historical volatility, Macys Inc is 4.47 times less risky than ThredUp. The stock trades about -0.3 of its potential returns per unit of risk. The ThredUp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  147.00  in ThredUp on October 26, 2024 and sell it today you would earn a total of  65.00  from holding ThredUp or generate 44.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Macys Inc  vs.  ThredUp

Macys Inc

Risk-Adjusted Performance

0 of 100

Very 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 very healthy primary indicators, Macys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ThredUp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ThredUp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ThredUp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and ThredUp

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

The idea behind Macys Inc and ThredUp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.