Correlation Between Wayfair and Envela Corp

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

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

Diversification Opportunities for Wayfair and Envela Corp

-0.13

Correlation Coefficient

Wayfair  Envela Corp

Good diversification

The 3 months correlation between Wayfair and Envela is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Envela Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envela Corp 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 Envela Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envela Corp has no effect on the direction of Wayfair i.e., Wayfair and Envela Corp go up and down completely randomly.

Pair Corralation between Wayfair and Envela Corp

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.53 times more return on investment than Envela Corp. However, Wayfair is 1.53 times more volatile than Envela Corp. It trades about 0.03 of its potential returns per unit of risk. Envela Corp is currently generating about 0.03 per unit of risk. If you would invest  3,784  in Wayfair on September 28, 2024 and sell it today you would earn a total of  691.00  from holding Wayfair or generate 18.26% return on investment over 90 days.

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

Wayfair  vs.  Envela Corp

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.

Envela Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Envela Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Envela Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayfair and Envela Corp

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

The idea behind Wayfair and Envela Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.