Correlation Between Kidpik Corp and Wayfair

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

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

Diversification Opportunities for Kidpik Corp and Wayfair

0.5

Correlation Coefficient

Kidpik Corp  Wayfair

Very weak diversification

The 3 months correlation between Kidpik and Wayfair is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Kidpik Corp and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and Kidpik Corp 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 Kidpik Corp 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 Kidpik Corp i.e., Kidpik Corp and Wayfair go up and down completely randomly.

Pair Corralation between Kidpik Corp and Wayfair

Considering the 90-day investment horizon Kidpik Corp is expected to under-perform the Wayfair. In addition to that, Kidpik Corp is 4.84 times more volatile than Wayfair. It trades about -0.18 of its total potential returns per unit of risk. Wayfair is currently generating about -0.07 per unit of volatility. If you would invest  4,462  in Wayfair on December 28, 2024 and sell it today you would lose (901.00) from holding Wayfair or give up 20.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.67%
Values	Daily Returns

Kidpik Corp  vs.  Wayfair

Kidpik Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kidpik Corp 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 forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Kidpik Corp and Wayfair

The main advantage of trading using opposite Kidpik Corp and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kidpik Corp 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 Kidpik Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.