Correlation Between Wayfair and Jumia Technologies
Can any of the company-specific risk be diversified away by investing in both Wayfair and Jumia Technologies 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 Jumia Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Jumia Technologies AG, you can compare the effects of market volatilities on Wayfair and Jumia Technologies 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 Jumia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Jumia Technologies.
Diversification Opportunities for Wayfair and Jumia Technologies
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wayfair and Jumia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Jumia Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jumia Technologies 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 Jumia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jumia Technologies has no effect on the direction of Wayfair i.e., Wayfair and Jumia Technologies go up and down completely randomly.
Pair Corralation between Wayfair and Jumia Technologies
Taking into account the 90-day investment horizon Wayfair is expected to generate 0.53 times more return on investment than Jumia Technologies. However, Wayfair is 1.9 times less risky than Jumia Technologies. It trades about -0.03 of its potential returns per unit of risk. Jumia Technologies AG is currently generating about -0.02 per unit of risk. If you would invest 5,792 in Wayfair on August 30, 2024 and sell it today you would lose (1,251) from holding Wayfair or give up 21.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. Jumia Technologies AG
Performance |
| Timeline |
| Wayfair |
| Jumia Technologies |
Wayfair and Jumia Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Jumia Technologies
The main advantage of trading using opposite Wayfair and Jumia Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, Jumia Technologies 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 Jumia Technologies will offset losses from the drop in Jumia Technologies' long position.The idea behind Wayfair and Jumia Technologies AG 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.| Jumia Technologies vs. Sea | Jumia Technologies vs. MercadoLibre | Jumia Technologies vs. PDD Holdings | Jumia Technologies vs. JD Inc Adr |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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