Correlation Between AutoNation and Wayfair
Can any of the company-specific risk be diversified away by investing in both AutoNation and Wayfair 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 AutoNation and Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Wayfair, you can compare the effects of market volatilities on AutoNation and Wayfair 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 AutoNation with a short position of Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Wayfair.
Diversification Opportunities for AutoNation and Wayfair
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AutoNation and Wayfair is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and AutoNation 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 AutoNation are associated (or correlated) with Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of AutoNation i.e., AutoNation and Wayfair go up and down completely randomly.
Pair Corralation between AutoNation and Wayfair
Allowing for the 90-day total investment horizon AutoNation is expected to generate 6.1 times less return on investment than Wayfair. But when comparing it to its historical volatility, AutoNation is 2.56 times less risky than Wayfair. It trades about 0.13 of its potential returns per unit of risk. Wayfair is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,026 in Wayfair on September 19, 2024 and sell it today you would earn a total of 1,016 from holding Wayfair or generate 25.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Wayfair
Performance |
| Timeline |
| AutoNation |
| Wayfair |
AutoNation and Wayfair Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Wayfair
The main advantage of trading using opposite AutoNation and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair's long position.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
| Wayfair vs. Floor Decor Holdings | Wayfair vs. Live Ventures | Wayfair vs. Home Depot | Wayfair vs. Lowes Companies |
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 the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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