Correlation Between Wayfair and Contextlogic
Can any of the company-specific risk be diversified away by investing in both Wayfair and Contextlogic 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 Contextlogic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Contextlogic, you can compare the effects of market volatilities on Wayfair and Contextlogic 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 Contextlogic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Contextlogic.
Diversification Opportunities for Wayfair and Contextlogic
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wayfair and Contextlogic is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Contextlogic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contextlogic 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 Contextlogic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contextlogic has no effect on the direction of Wayfair i.e., Wayfair and Contextlogic go up and down completely randomly.
Pair Corralation between Wayfair and Contextlogic
Taking into account the 90-day investment horizon Wayfair is expected to generate 2.65 times less return on investment than Contextlogic. In addition to that, Wayfair is 2.02 times more volatile than Contextlogic. It trades about 0.05 of its total potential returns per unit of risk. Contextlogic is currently generating about 0.24 per unit of volatility. If you would invest 540.00 in Contextlogic on August 30, 2024 and sell it today you would earn a total of 171.00 from holding Contextlogic or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. Contextlogic
Performance |
| Timeline |
| Wayfair |
| Contextlogic |
Wayfair and Contextlogic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Contextlogic
The main advantage of trading using opposite Wayfair and Contextlogic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, Contextlogic 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 Contextlogic will offset losses from the drop in Contextlogic's long position.The idea behind Wayfair and Contextlogic 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.| Contextlogic vs. Univest Pennsylvania | Contextlogic vs. KeyCorp | Contextlogic vs. Lindblad Expeditions Holdings | Contextlogic vs. Aterian |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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