Correlation Between Live Ventures and Wayfair

Can any of the company-specific risk be diversified away by investing in both Live Ventures 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 Live Ventures and Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Live Ventures and Wayfair, you can compare the effects of market volatilities on Live Ventures 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 Live Ventures with a short position of Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Ventures and Wayfair.

Diversification Opportunities for Live Ventures and Wayfair

0.44

Correlation Coefficient

Live Ventures  Wayfair

Very weak diversification

The 3 months correlation between Live and Wayfair is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Live Ventures and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and Live Ventures 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 Live Ventures 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 Live Ventures i.e., Live Ventures and Wayfair go up and down completely randomly.

Pair Corralation between Live Ventures and Wayfair

Given the investment horizon of 90 days Live Ventures is expected to under-perform the Wayfair. In addition to that, Live Ventures is 1.05 times more volatile than Wayfair. It trades about -0.2 of its total potential returns per unit of risk. Wayfair is currently generating about 0.05 per unit of volatility. If you would invest  4,803  in Wayfair on September 16, 2024 and sell it today you would earn a total of  426.00  from holding Wayfair or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Live Ventures  vs.  Wayfair

Live Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Wayfair

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wayfair are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Wayfair showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Ventures and Wayfair

The main advantage of trading using opposite Live Ventures and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Ventures 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.

The idea behind Live Ventures and Wayfair 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.