Correlation Between MACYS and Emerson Radio

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Can any of the company-specific risk be diversified away by investing in both MACYS and Emerson Radio 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 Emerson Radio 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 Emerson Radio, you can compare the effects of market volatilities on MACYS and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACYS and Emerson Radio.

Diversification Opportunities for MACYS and Emerson Radio

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between MACYS and Emerson is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding MACYS RETAIL HLDGS and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of MACYS i.e., MACYS and Emerson Radio go up and down completely randomly.

Pair Corralation between MACYS and Emerson Radio

Assuming the 90 days trading horizon MACYS RETAIL HLDGS is expected to under-perform the Emerson Radio. But the bond apears to be less risky and, when comparing its historical volatility, MACYS RETAIL HLDGS is 2.06 times less risky than Emerson Radio. The bond trades about 0.0 of its potential returns per unit of risk. The Emerson Radio is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Emerson Radio on October 24, 2024 and sell it today you would lose (4.00) from holding Emerson Radio or give up 7.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy93.12%
ValuesDaily Returns

MACYS RETAIL HLDGS  vs.  Emerson Radio

 Performance 
       Timeline  
MACYS RETAIL HLDGS 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in MACYS RETAIL HLDGS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.
Emerson Radio 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Radio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Emerson Radio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

MACYS and Emerson Radio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MACYS and Emerson Radio

The main advantage of trading using opposite MACYS and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACYS position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.
The idea behind MACYS RETAIL HLDGS and Emerson Radio 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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