Correlation Between Group 1 and Wayfair

Can any of the company-specific risk be diversified away by investing in both Group 1 and Wayfair 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 Group 1 and Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 1 Automotive and Wayfair, you can compare the effects of market volatilities on Group 1 and Wayfair 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 Group 1 with a short position of Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Wayfair.

Diversification Opportunities for Group 1 and Wayfair

0.57

Correlation Coefficient

Group 1  Wayfair

Very weak diversification

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

Pair Corralation between Group 1 and Wayfair

Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.48 times more return on investment than Wayfair. However, Group 1 Automotive is 2.09 times less risky than Wayfair. It trades about -0.01 of its potential returns per unit of risk. Wayfair is currently generating about -0.04 per unit of risk. If you would invest  42,268  in Group 1 Automotive on December 27, 2024 and sell it today you would lose (1,268) from holding Group 1 Automotive or give up 3.0% of portfolio value over 90 days.

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

Group 1 Automotive  vs.  Wayfair

Group 1 Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Group 1 Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Group 1 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Wayfair

Risk-Adjusted Performance

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.

Pair Trading with Group 1 and Wayfair

The main advantage of trading using opposite Group 1 and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair's long position.

The idea behind Group 1 Automotive and Wayfair 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.