Correlation Between Big Lots and Macys

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Can any of the company-specific risk be diversified away by investing in both Big Lots 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 Big Lots and Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Lots and Macys Inc, you can compare the effects of market volatilities on Big Lots 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 Big Lots with a short position of Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Lots and Macys.

Diversification Opportunities for Big Lots and Macys

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Big Lots and Macys is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Big Lots 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 Big Lots 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 Inc has no effect on the direction of Big Lots i.e., Big Lots and Macys go up and down completely randomly.

Pair Corralation between Big Lots and Macys

Considering the 90-day investment horizon Big Lots is expected to generate 0.92 times more return on investment than Macys. However, Big Lots is 1.09 times less risky than Macys. It trades about 0.01 of its potential returns per unit of risk. Macys Inc is currently generating about -0.1 per unit of risk. If you would invest  2,370  in Big Lots on May 11, 2022 and sell it today you would lose (32.00)  from holding Big Lots or give up 1.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Big Lots  vs.  Macys Inc

 Performance (%) 
       Timeline  
Big Lots 
Big Lots Performance
0 of 100
Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in September 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Big Lots Price Channel

Macys Inc 
Macys Performance
0 of 100
Over the last 90 days Macys Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, Macys is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Macys Price Channel

Big Lots and Macys Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Big Lots and Macys

The main advantage of trading using opposite Big Lots and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots 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' long position.
The idea behind Big Lots and Macys Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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