Correlation Between Wayfair and Farfetch
Can any of the company-specific risk be diversified away by investing in both Wayfair and Farfetch 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 Farfetch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Farfetch Ltd Class, you can compare the effects of market volatilities on Wayfair and Farfetch 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 Farfetch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Farfetch.
Diversification Opportunities for Wayfair and Farfetch
Pay attention - limited upside
The 3 months correlation between Wayfair and Farfetch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Farfetch Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Class 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 Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Class has no effect on the direction of Wayfair i.e., Wayfair and Farfetch go up and down completely randomly.
Pair Corralation between Wayfair and Farfetch
Taking into account the 90-day investment horizon Wayfair is expected to generate 0.99 times more return on investment than Farfetch. However, Wayfair is 1.01 times less risky than Farfetch. It trades about 0.02 of its potential returns per unit of risk. Farfetch Ltd Class is currently generating about 0.01 per unit of risk. If you would invest 5,258 in Wayfair on November 2, 2024 and sell it today you would lose (420.00) from holding Wayfair or give up 7.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 22.72% |
| Values | Daily Returns |
Wayfair vs. Farfetch Ltd Class
Performance |
| Timeline |
| Wayfair |
| Farfetch Class |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Wayfair and Farfetch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Farfetch
The main advantage of trading using opposite Wayfair and Farfetch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, Farfetch 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 Farfetch will offset losses from the drop in Farfetch's long position.The idea behind Wayfair and Farfetch Ltd Class 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.| Farfetch vs. JD Inc Adr | Farfetch vs. Alibaba Group Holding | Farfetch vs. Sea | Farfetch vs. Vipshop Holdings Limited |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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