Correlation Between Wayfair and Coupang LLC

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

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

Diversification Opportunities for Wayfair and Coupang LLC

-0.05

Correlation Coefficient

Wayfair  Coupang LLC

Good diversification

The 3 months correlation between Wayfair and Coupang is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of Wayfair i.e., Wayfair and Coupang LLC go up and down completely randomly.

Pair Corralation between Wayfair and Coupang LLC

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Coupang LLC. In addition to that, Wayfair is 1.7 times more volatile than Coupang LLC. It trades about -0.04 of its total potential returns per unit of risk. Coupang LLC is currently generating about -0.04 per unit of volatility. If you would invest  2,478  in Coupang LLC on September 23, 2024 and sell it today you would lose (184.00) from holding Coupang LLC or give up 7.43% of portfolio value over 90 days.

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

Wayfair  vs.  Coupang LLC

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 latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Coupang LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coupang LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Coupang LLC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wayfair and Coupang LLC

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

The idea behind Wayfair and Coupang LLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.