Correlation Between Wayfair and Continental
Can any of the company-specific risk be diversified away by investing in both Wayfair and Continental 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 Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Caleres, you can compare the effects of market volatilities on Wayfair and Continental 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 Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Continental.
Diversification Opportunities for Wayfair and Continental
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wayfair and Continental is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Wayfair i.e., Wayfair and Continental go up and down completely randomly.
Pair Corralation between Wayfair and Continental
Taking into account the 90-day investment horizon Wayfair is expected to generate 1.4 times more return on investment than Continental. However, Wayfair is 1.4 times more volatile than Caleres. It trades about 0.1 of its potential returns per unit of risk. Caleres is currently generating about -0.51 per unit of risk. If you would invest 4,604 in Wayfair on November 8, 2024 and sell it today you would earn a total of 227.00 from holding Wayfair or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. Caleres
Performance |
| Timeline |
| Wayfair |
| Continental |
Wayfair and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Continental
The main advantage of trading using opposite Wayfair and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.The idea behind Wayfair and Caleres 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.| Continental vs. Vera Bradley | Continental vs. Wolverine World Wide | Continental vs. Rocky Brands | Continental vs. Steven Madden |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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