Correlation Between Wayfair and Sportsmans

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

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

Diversification Opportunities for Wayfair and Sportsmans

0.57

Correlation Coefficient

Wayfair  Sportsmans

Very weak diversification

The 3 months correlation between Wayfair and Sportsmans is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Sportsmans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsmans 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 Sportsmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsmans has no effect on the direction of Wayfair i.e., Wayfair and Sportsmans go up and down completely randomly.

Pair Corralation between Wayfair and Sportsmans

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Sportsmans. But the stock apears to be less risky and, when comparing its historical volatility, Wayfair is 1.22 times less risky than Sportsmans. The stock trades about -0.01 of its potential returns per unit of risk. The Sportsmans is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  241.00  in Sportsmans on September 26, 2024 and sell it today you would lose (9.00) from holding Sportsmans or give up 3.73% of portfolio value over 90 days.

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

Wayfair  vs.  Sportsmans

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.

Sportsmans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sportsmans has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Wayfair and Sportsmans

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

The idea behind Wayfair and Sportsmans 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..