Correlation Between Wayfair and Kohls Corp

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

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

Diversification Opportunities for Wayfair and Kohls Corp

0.19

Correlation Coefficient

Wayfair  Kohls Corp

Average diversification

The 3 months correlation between Wayfair and Kohls is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Kohls Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohls 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 Kohls Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohls Corp has no effect on the direction of Wayfair i.e., Wayfair and Kohls Corp go up and down completely randomly.

Pair Corralation between Wayfair and Kohls Corp

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Kohls Corp. In addition to that, Wayfair is 2.0 times more volatile than Kohls Corp. It trades about -0.06 of its total potential returns per unit of risk. Kohls Corp is currently generating about -0.01 per unit of volatility. If you would invest  1,448  in Kohls Corp on September 29, 2024 and sell it today you would lose (12.00) from holding Kohls Corp or give up 0.83% of portfolio value over 90 days.

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

Wayfair  vs.  Kohls 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.

Kohls Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohls Corp 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wayfair and Kohls Corp

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

The idea behind Wayfair and Kohls 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.