Correlation Between Macys and Twilio

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

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

Diversification Opportunities for Macys and Twilio

0.61

Correlation Coefficient

Macys  Twilio

Poor diversification

The 3 months correlation between Macys and Twilio is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Twilio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twilio Inc 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 Twilio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twilio Inc has no effect on the direction of Macys i.e., Macys and Twilio go up and down completely randomly.

Pair Corralation between Macys and Twilio

Taking into account the 90-day investment horizon Macys is expected to generate 1.26 times less return on investment than Twilio. In addition to that, Macys is 1.41 times more volatile than Twilio Inc. It trades about 0.21 of its total potential returns per unit of risk. Twilio Inc is currently generating about 0.38 per unit of volatility. If you would invest  9,641  in Twilio Inc on September 17, 2024 and sell it today you would earn a total of  1,529  from holding Twilio Inc or generate 15.86% return on investment over 90 days.

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

Macys Inc  vs.  Twilio Inc

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.

Twilio Inc

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Twilio Inc are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Twilio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and Twilio

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

The idea behind Macys Inc and Twilio 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.