Correlation Between Macys and Agilent Technologies

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

By analyzing existing cross correlation between Macys Inc and Agilent Technologies, you can compare the effects of market volatilities on Macys and Agilent Technologies 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 Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Agilent Technologies.

Diversification Opportunities for Macys and Agilent Technologies

0.75

Correlation Coefficient

Macys  Agilent Technologies

Poor diversification

The 3 months correlation between Macys and Agilent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies 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 Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Macys i.e., Macys and Agilent Technologies go up and down completely randomly.

Pair Corralation between Macys and Agilent Technologies

Taking into account the 90-day investment horizon Macys Inc is expected to generate 1.63 times more return on investment than Agilent Technologies. However, Macys is 1.63 times more volatile than Agilent Technologies. It trades about -0.22 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.37 per unit of risk. If you would invest  2,079  in Macys Inc on January 21, 2024 and sell it today you would lose (226.00) from holding Macys Inc or give up 10.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Macys Inc  vs.  Agilent Technologies

Macys Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Macys is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Agilent Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Macys and Agilent Technologies

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

The idea behind Macys Inc and Agilent Technologies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.