Correlation Between Warby Parker and Big 5

Can any of the company-specific risk be diversified away by investing in both Warby Parker and Big 5 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 Warby Parker and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Warby Parker and Big 5 Sporting, you can compare the effects of market volatilities on Warby Parker and Big 5 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 Warby Parker with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warby Parker and Big 5.

Diversification Opportunities for Warby Parker and Big 5

-0.68

Correlation Coefficient

Warby Parker  Big 5

Excellent diversification

The 3 months correlation between Warby and Big is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Warby Parker and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Warby Parker 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 Warby Parker are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Warby Parker i.e., Warby Parker and Big 5 go up and down completely randomly.

Pair Corralation between Warby Parker and Big 5

Given the investment horizon of 90 days Warby Parker is expected to generate 0.69 times more return on investment than Big 5. However, Warby Parker is 1.45 times less risky than Big 5. It trades about 0.28 of its potential returns per unit of risk. Big 5 Sporting is currently generating about 0.0 per unit of risk. If you would invest  1,391  in Warby Parker on September 1, 2024 and sell it today you would earn a total of  863.00  from holding Warby Parker or generate 62.04% return on investment over 90 days.

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

Warby Parker  vs.  Big 5 Sporting

Warby Parker

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Warby Parker are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, Warby Parker showed solid returns over the last few months and may actually be approaching a breakup point.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Warby Parker and Big 5

The main advantage of trading using opposite Warby Parker and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warby Parker position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Warby Parker and Big 5 Sporting 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.