Correlation Between Wayfair and Dicks Sporting

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

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

Diversification Opportunities for Wayfair and Dicks Sporting

0.59

Correlation Coefficient

Wayfair  Dicks Sporting

Very weak diversification

The 3 months correlation between Wayfair and Dicks is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Wayfair i.e., Wayfair and Dicks Sporting go up and down completely randomly.

Pair Corralation between Wayfair and Dicks Sporting

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.92 times more return on investment than Dicks Sporting. However, Wayfair is 1.92 times more volatile than Dicks Sporting Goods. It trades about 0.06 of its potential returns per unit of risk. Dicks Sporting Goods is currently generating about 0.1 per unit of risk. If you would invest  4,403  in Wayfair on September 23, 2024 and sell it today you would earn a total of  169.00  from holding Wayfair or generate 3.84% return on investment over 90 days.

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

Wayfair  vs.  Dicks Sporting Goods

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 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.

Dicks Sporting Goods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Dicks Sporting is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wayfair and Dicks Sporting

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

The idea behind Wayfair and Dicks Sporting Goods 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.