Correlation Between Wayfair and Funko

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

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

Diversification Opportunities for Wayfair and Funko

0.65

Correlation Coefficient

Wayfair  Funko

Poor diversification

The 3 months correlation between Wayfair and Funko is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko 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 Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Wayfair i.e., Wayfair and Funko go up and down completely randomly.

Pair Corralation between Wayfair and Funko

Taking into account the 90-day investment horizon Wayfair is expected to generate 2.2 times less return on investment than Funko. In addition to that, Wayfair is 1.63 times more volatile than Funko Inc. It trades about 0.1 of its total potential returns per unit of risk. Funko Inc is currently generating about 0.34 per unit of volatility. If you would invest  1,033  in Funko Inc on September 22, 2024 and sell it today you would earn a total of  216.00  from holding Funko Inc or generate 20.91% return on investment over 90 days.

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

Wayfair  vs.  Funko Inc

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.

Funko Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Funko may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wayfair and Funko

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

The idea behind Wayfair and Funko 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.