Correlation Between Wayfair and AutoNation
Can any of the company-specific risk be diversified away by investing in both Wayfair and AutoNation 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 Wayfair and AutoNation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and AutoNation, you can compare the effects of market volatilities on Wayfair and AutoNation 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 Wayfair with a short position of AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and AutoNation.
Diversification Opportunities for Wayfair and AutoNation
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wayfair and AutoNation is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Wayfair 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 Wayfair are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Wayfair i.e., Wayfair and AutoNation go up and down completely randomly.
Pair Corralation between Wayfair and AutoNation
Taking into account the 90-day investment horizon Wayfair is expected to generate 2.56 times more return on investment than AutoNation. However, Wayfair is 2.56 times more volatile than AutoNation. It trades about 0.31 of its potential returns per unit of risk. AutoNation is currently generating about 0.13 per unit of risk. 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 |
Wayfair vs. AutoNation
Performance |
| Timeline |
| Wayfair |
| AutoNation |
Wayfair and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and AutoNation
The main advantage of trading using opposite Wayfair and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.| Wayfair vs. Floor Decor Holdings | Wayfair vs. Live Ventures | Wayfair vs. Home Depot | Wayfair vs. Lowes Companies |
| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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