Correlation Between Phonex and Wayfair

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

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

Diversification Opportunities for Phonex and Wayfair

-0.37

Correlation Coefficient

Phonex  Wayfair

Very good diversification

The 3 months correlation between Phonex and Wayfair is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Phonex Inc and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and Phonex 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 Phonex Inc 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 Phonex i.e., Phonex and Wayfair go up and down completely randomly.

Pair Corralation between Phonex and Wayfair

Given the investment horizon of 90 days Phonex is expected to generate 3.17 times less return on investment than Wayfair. But when comparing it to its historical volatility, Phonex Inc is 1.3 times less risky than Wayfair. It trades about 0.03 of its potential returns per unit of risk. Wayfair is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,090  in Wayfair on September 3, 2024 and sell it today you would earn a total of  534.00  from holding Wayfair or generate 13.06% return on investment over 90 days.

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

Phonex Inc  vs.  Wayfair

Phonex Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phonex Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Phonex is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Wayfair

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wayfair are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Wayfair showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phonex and Wayfair

The main advantage of trading using opposite Phonex and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phonex 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 Phonex Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.