Correlation Between Wayfair and Birks

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

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

Diversification Opportunities for Wayfair and Birks

0.1

Correlation Coefficient

Wayfair  Birks

Average diversification

The 3 months correlation between Wayfair and Birks is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Birks Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birks Group 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 Birks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birks Group has no effect on the direction of Wayfair i.e., Wayfair and Birks go up and down completely randomly.

Pair Corralation between Wayfair and Birks

Taking into account the 90-day investment horizon Wayfair is expected to generate 34.37 times less return on investment than Birks. In addition to that, Wayfair is 1.54 times more volatile than Birks Group. It trades about 0.0 of its total potential returns per unit of risk. Birks Group is currently generating about 0.07 per unit of volatility. If you would invest  156.00  in Birks Group on September 27, 2024 and sell it today you would earn a total of  5.00  from holding Birks Group or generate 3.21% return on investment over 90 days.

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

Wayfair  vs.  Birks Group

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.

Birks Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birks Group 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Wayfair and Birks

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

The idea behind Wayfair and Birks Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.