Correlation Between Wayfair and Arko Corp

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

By analyzing existing cross correlation between Wayfair and Arko Corp, you can compare the effects of market volatilities on Wayfair and Arko Corp 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 Arko Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Arko Corp.

Diversification Opportunities for Wayfair and Arko Corp

0.46

Correlation Coefficient

Wayfair  Arko Corp

Very weak diversification

The 3 months correlation between Wayfair and Arko is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko Corp 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 Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of Wayfair i.e., Wayfair and Arko Corp go up and down completely randomly.

Pair Corralation between Wayfair and Arko Corp

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.88 times more return on investment than Arko Corp. However, Wayfair is 1.88 times more volatile than Arko Corp. It trades about 0.03 of its potential returns per unit of risk. Arko Corp is currently generating about 0.0 per unit of risk. If you would invest  3,545  in Wayfair on September 26, 2024 and sell it today you would earn a total of  930.00  from holding Wayfair or generate 26.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Wayfair  vs.  Arko Corp

Wayfair

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wayfair has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Arko Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Arko Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wayfair and Arko Corp

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

The idea behind Wayfair and Arko Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.