Correlation Between MACYS and Chevron Corp

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

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

Diversification Opportunities for MACYS and Chevron Corp

0.28

Correlation Coefficient

MACYS  Chevron Corp

Modest diversification

The 3 months correlation between MACYS and Chevron is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MACYS RETAIL HLDGS and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 RETAIL HLDGS are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of MACYS i.e., MACYS and Chevron Corp go up and down completely randomly.

Pair Corralation between MACYS and Chevron Corp

Assuming the 90 days trading horizon MACYS RETAIL HLDGS is expected to generate 1.09 times more return on investment than Chevron Corp. However, MACYS is 1.09 times more volatile than Chevron Corp. It trades about 0.01 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.01 per unit of risk. If you would invest  9,980  in MACYS RETAIL HLDGS on October 7, 2024 and sell it today you would lose (85.00) from holding MACYS RETAIL HLDGS or give up 0.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.56%
Values	Daily Returns

MACYS RETAIL HLDGS  vs.  Chevron Corp

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Chevron Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MACYS and Chevron Corp

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

The idea behind MACYS RETAIL HLDGS and Chevron Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.