Correlation Between Boohoo PLC and Wayfair
Can any of the company-specific risk be diversified away by investing in both Boohoo PLC and Wayfair 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 Boohoo PLC and Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BoohooCom PLC ADR and Wayfair, you can compare the effects of market volatilities on Boohoo PLC and Wayfair 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 Boohoo PLC with a short position of Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boohoo PLC and Wayfair.
Diversification Opportunities for Boohoo PLC and Wayfair
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Boohoo and Wayfair is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BoohooCom PLC ADR and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and Boohoo PLC 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 BoohooCom PLC ADR are associated (or correlated) with Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of Boohoo PLC i.e., Boohoo PLC and Wayfair go up and down completely randomly.
Pair Corralation between Boohoo PLC and Wayfair
Assuming the 90 days horizon BoohooCom PLC ADR is expected to under-perform the Wayfair. But the pink sheet apears to be less risky and, when comparing its historical volatility, BoohooCom PLC ADR is 1.69 times less risky than Wayfair. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Wayfair is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,302 in Wayfair on September 7, 2024 and sell it today you would earn a total of 1,051 from holding Wayfair or generate 24.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.79% |
Values | Daily Returns |
BoohooCom PLC ADR vs. Wayfair
Performance |
Timeline |
BoohooCom PLC ADR |
Wayfair |
Boohoo PLC and Wayfair Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Boohoo PLC and Wayfair
The main advantage of trading using opposite Boohoo PLC and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boohoo PLC position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair's long position.Boohoo PLC vs. ASOS plc PK | Boohoo PLC vs. Berkeley Group Holdings | Boohoo PLC vs. ZALANDO SE ADR | Boohoo PLC vs. Barratt Developments PLC |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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