Correlation Between AutoZone and Wayfair
Can any of the company-specific risk be diversified away by investing in both AutoZone 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 AutoZone and Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoZone and Wayfair, you can compare the effects of market volatilities on AutoZone 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 AutoZone with a short position of Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and Wayfair.
Diversification Opportunities for AutoZone and Wayfair
Good diversification
The 3 months correlation between AutoZone and Wayfair is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and AutoZone 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 AutoZone 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 AutoZone i.e., AutoZone and Wayfair go up and down completely randomly.
Pair Corralation between AutoZone and Wayfair
Considering the 90-day investment horizon AutoZone is expected to generate 2.66 times less return on investment than Wayfair. But when comparing it to its historical volatility, AutoZone is 2.77 times less risky than Wayfair. It trades about 0.04 of its potential returns per unit of risk. Wayfair is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,443 in Wayfair on August 28, 2024 and sell it today you would earn a total of 87.00 from holding Wayfair or generate 1.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoZone vs. Wayfair
Performance |
| Timeline |
| AutoZone |
| Wayfair |
AutoZone and Wayfair Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoZone and Wayfair
The main advantage of trading using opposite AutoZone and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone 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.| AutoZone vs. Kingsway Financial Services | AutoZone vs. KAR Auction Services | AutoZone vs. Cango Inc | AutoZone vs. Vroom Inc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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