Correlation Between Macys and Woolworths Holdings

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

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

Diversification Opportunities for Macys and Woolworths Holdings

0.52

Correlation Coefficient

Macys  Woolworths Holdings

Very weak diversification

The 3 months correlation between Macys and Woolworths is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Woolworths Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings 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 Woolworths Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Holdings has no effect on the direction of Macys i.e., Macys and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Macys and Woolworths Holdings

Taking into account the 90-day investment horizon Macys Inc is expected to under-perform the Woolworths Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Macys Inc is 1.8 times less risky than Woolworths Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The Woolworths Holdings Ltd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  332.00  in Woolworths Holdings Ltd on November 28, 2024 and sell it today you would earn a total of  8.00  from holding Woolworths Holdings Ltd or generate 2.41% 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.  Woolworths Holdings Ltd

Macys Inc

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Woolworths Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Woolworths Holdings 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 Woolworths Holdings

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

The idea behind Macys Inc and Woolworths Holdings Ltd 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.