Correlation Between Wayfair and ZALANDO SE
Can any of the company-specific risk be diversified away by investing in both Wayfair and ZALANDO SE 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 ZALANDO SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and ZALANDO SE ADR, you can compare the effects of market volatilities on Wayfair and ZALANDO SE 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 ZALANDO SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and ZALANDO SE.
Diversification Opportunities for Wayfair and ZALANDO SE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wayfair and ZALANDO is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and ZALANDO SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZALANDO SE ADR 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 ZALANDO SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZALANDO SE ADR has no effect on the direction of Wayfair i.e., Wayfair and ZALANDO SE go up and down completely randomly.
Pair Corralation between Wayfair and ZALANDO SE
Taking into account the 90-day investment horizon Wayfair is expected to generate 4.33 times less return on investment than ZALANDO SE. In addition to that, Wayfair is 1.39 times more volatile than ZALANDO SE ADR. It trades about 0.01 of its total potential returns per unit of risk. ZALANDO SE ADR is currently generating about 0.07 per unit of volatility. If you would invest 1,383 in ZALANDO SE ADR on August 25, 2024 and sell it today you would earn a total of 144.00 from holding ZALANDO SE ADR or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. ZALANDO SE ADR
Performance |
| Timeline |
| Wayfair |
| ZALANDO SE ADR |
Wayfair and ZALANDO SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and ZALANDO SE
The main advantage of trading using opposite Wayfair and ZALANDO SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair position performs unexpectedly, ZALANDO SE 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 ZALANDO SE will offset losses from the drop in ZALANDO SE's long position.The idea behind Wayfair and ZALANDO SE ADR 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.| ZALANDO SE vs. ASOS Plc | ZALANDO SE vs. BoohooCom PLC ADR | ZALANDO SE vs. Allegroeu SA | ZALANDO SE vs. AKA Brands Holding |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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