Correlation Between WESCO and Chewy

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

By analyzing existing cross correlation between WESCO Distribution 725 and Chewy Inc, you can compare the effects of market volatilities on WESCO and Chewy 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 WESCO with a short position of Chewy. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESCO and Chewy.

Diversification Opportunities for WESCO and Chewy

-0.08

Correlation Coefficient

WESCO  Chewy

Good diversification

The 3 months correlation between WESCO and Chewy is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding WESCO Distribution 725 and Chewy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewy Inc and WESCO 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 WESCO Distribution 725 are associated (or correlated) with Chewy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewy Inc has no effect on the direction of WESCO i.e., WESCO and Chewy go up and down completely randomly.

Pair Corralation between WESCO and Chewy

Assuming the 90 days trading horizon WESCO is expected to generate 154.56 times less return on investment than Chewy. But when comparing it to its historical volatility, WESCO Distribution 725 is 13.23 times less risky than Chewy. It trades about 0.01 of its potential returns per unit of risk. Chewy Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,929  in Chewy Inc on September 28, 2024 and sell it today you would earn a total of  477.00  from holding Chewy Inc or generate 16.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

WESCO Distribution 725  vs.  Chewy Inc

WESCO Distribution 725

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESCO Distribution 725 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WESCO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chewy Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WESCO and Chewy

The main advantage of trading using opposite WESCO and Chewy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESCO position performs unexpectedly, Chewy 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 Chewy will offset losses from the drop in Chewy's long position.

The idea behind WESCO Distribution 725 and Chewy Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.