Correlation Between Worthington Steel and MACYS

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

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

Diversification Opportunities for Worthington Steel and MACYS

0.07

Correlation Coefficient

Worthington Steel  MACYS

Significant diversification

The 3 months correlation between Worthington and MACYS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Worthington Steel 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 Worthington Steel 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 Worthington Steel 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 Worthington Steel i.e., Worthington Steel and MACYS go up and down completely randomly.

Pair Corralation between Worthington Steel and MACYS

Allowing for the 90-day total investment horizon Worthington Steel is expected to under-perform the MACYS. In addition to that, Worthington Steel is 3.36 times more volatile than MACYS RETAIL HLDGS. It trades about -0.37 of its total potential returns per unit of risk. MACYS RETAIL HLDGS is currently generating about -0.13 per unit of volatility. If you would invest  10,297  in MACYS RETAIL HLDGS on October 4, 2024 and sell it today you would lose (312.00) from holding MACYS RETAIL HLDGS or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Worthington Steel  vs.  MACYS RETAIL HLDGS

Worthington Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worthington Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Worthington Steel is not utilizing all of its potentials. The current 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 Worthington Steel and MACYS

The main advantage of trading using opposite Worthington Steel and MACYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worthington Steel 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 Worthington Steel 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.