Correlation Between Macys and Industrias Bachoco

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

Diversification Opportunities for Macys and Industrias Bachoco

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Macys and Industrias is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Industrias Bachoco SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Bachoco SAB 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 Inc are associated (or correlated) with Industrias Bachoco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Bachoco SAB has no effect on the direction of Macys i.e., Macys and Industrias Bachoco go up and down completely randomly.

Pair Corralation between Macys and Industrias Bachoco

Taking into account the 90-day investment horizon Macys Inc is expected to generate 3.04 times more return on investment than Industrias Bachoco. However, Macys is 3.04 times more volatile than Industrias Bachoco SAB. It trades about 0.19 of its potential returns per unit of risk. Industrias Bachoco SAB is currently generating about 0.07 per unit of risk. If you would invest  1,744  in Macys Inc on September 7, 2022 and sell it today you would earn a total of  525.00  from holding Macys Inc or generate 30.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Macys Inc  vs.  Industrias Bachoco SAB

 Performance (%) 
       Timeline  
Macys Inc 
Macys Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Macys revealed solid returns over the last few months and may actually be approaching a breakup point.

Macys Price Channel

Industrias Bachoco SAB 
Industrias Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Bachoco SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Industrias Bachoco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Industrias Price Channel

Macys and Industrias Bachoco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Macys and Industrias Bachoco

The main advantage of trading using opposite Macys and Industrias Bachoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Industrias Bachoco 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 Industrias Bachoco will offset losses from the drop in Industrias Bachoco's long position.
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The idea behind Macys Inc and Industrias Bachoco SAB 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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