Correlation Between Wayfair and Etsy

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

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

Diversification Opportunities for Wayfair and Etsy

0.84

Correlation Coefficient

Wayfair  Etsy

Very poor diversification

The 3 months correlation between Wayfair and Etsy is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Wayfair i.e., Wayfair and Etsy go up and down completely randomly.

Pair Corralation between Wayfair and Etsy

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Etsy. In addition to that, Wayfair is 1.6 times more volatile than Etsy Inc. It trades about -0.06 of its total potential returns per unit of risk. Etsy Inc is currently generating about -0.06 per unit of volatility. If you would invest  5,271  in Etsy Inc on December 27, 2024 and sell it today you would lose (578.00) from holding Etsy Inc or give up 10.97% of portfolio value over 90 days.

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

Wayfair  vs.  Etsy Inc

Wayfair

Risk-Adjusted Performance

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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Etsy Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Etsy Inc 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Wayfair and Etsy

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

The idea behind Wayfair and Etsy Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.