Correlation Between Microsoft and MACYS

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

By analyzing existing cross correlation between Microsoft and MACYS RETAIL HLDGS, you can compare the effects of market volatilities on Microsoft and MACYS 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 Microsoft with a short position of MACYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MACYS.

Diversification Opportunities for Microsoft and MACYS

-0.35

Correlation Coefficient

Microsoft  MACYS

Very good diversification

The 3 months correlation between Microsoft and MACYS is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MACYS RETAIL HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACYS RETAIL HLDGS and Microsoft 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 Microsoft are associated (or correlated) with MACYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACYS RETAIL HLDGS has no effect on the direction of Microsoft i.e., Microsoft and MACYS go up and down completely randomly.

Pair Corralation between Microsoft and MACYS

Given the investment horizon of 90 days Microsoft is expected to generate 1.12 times more return on investment than MACYS. However, Microsoft is 1.12 times more volatile than MACYS RETAIL HLDGS. It trades about 0.02 of its potential returns per unit of risk. MACYS RETAIL HLDGS is currently generating about -0.01 per unit of risk. If you would invest  41,830  in Microsoft on October 12, 2024 and sell it today you would earn a total of  626.00  from holding Microsoft or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.52%
Values	Daily Returns

Microsoft  vs.  MACYS RETAIL HLDGS

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

MACYS RETAIL HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Microsoft and MACYS

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

The idea behind Microsoft and MACYS RETAIL HLDGS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.