Correlation Between Wayfair and Abercrombie Fitch

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

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

Diversification Opportunities for Wayfair and Abercrombie Fitch

0.12

Correlation Coefficient

Wayfair  Abercrombie Fitch

Average diversification

The 3 months correlation between Wayfair and Abercrombie is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Abercrombie Fitch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch 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 Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of Wayfair i.e., Wayfair and Abercrombie Fitch go up and down completely randomly.

Pair Corralation between Wayfair and Abercrombie Fitch

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Abercrombie Fitch. In addition to that, Wayfair is 1.02 times more volatile than Abercrombie Fitch. It trades about -0.06 of its total potential returns per unit of risk. Abercrombie Fitch is currently generating about 0.0 per unit of volatility. If you would invest  15,450  in Abercrombie Fitch on September 26, 2024 and sell it today you would lose (243.00) from holding Abercrombie Fitch or give up 1.57% of portfolio value over 90 days.

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

Wayfair  vs.  Abercrombie Fitch

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.

Abercrombie Fitch

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Abercrombie Fitch are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Abercrombie Fitch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayfair and Abercrombie Fitch

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

The idea behind Wayfair and Abercrombie Fitch 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.