Correlation Between Wayfair and Linkage Global
Can any of the company-specific risk be diversified away by investing in both Wayfair and Linkage Global 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 Linkage Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Linkage Global Ordinary, you can compare the effects of market volatilities on Wayfair and Linkage Global 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 Linkage Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Linkage Global.
Diversification Opportunities for Wayfair and Linkage Global
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wayfair and Linkage is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Linkage Global Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linkage Global Ordinary 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 Linkage Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linkage Global Ordinary has no effect on the direction of Wayfair i.e., Wayfair and Linkage Global go up and down completely randomly.
Pair Corralation between Wayfair and Linkage Global
Taking into account the 90-day investment horizon Wayfair is expected to generate 0.63 times more return on investment than Linkage Global. However, Wayfair is 1.58 times less risky than Linkage Global. It trades about 0.08 of its potential returns per unit of risk. Linkage Global Ordinary is currently generating about -0.07 per unit of risk. If you would invest 4,296 in Wayfair on August 30, 2024 and sell it today you would earn a total of 245.00 from holding Wayfair or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. Linkage Global Ordinary
Performance |
| Timeline |
| Wayfair |
| Linkage Global Ordinary |
Wayfair and Linkage Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Linkage Global
The main advantage of trading using opposite Wayfair and Linkage Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, Linkage Global 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 Linkage Global will offset losses from the drop in Linkage Global's long position.The idea behind Wayfair and Linkage Global Ordinary 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.| Linkage Global vs. Univest Pennsylvania | Linkage Global vs. Centessa Pharmaceuticals PLC | Linkage Global vs. Encore Capital Group | Linkage Global vs. Ardelyx |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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