Correlation Between Wayfair and Mister Car

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

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

Diversification Opportunities for Wayfair and Mister Car

-0.53

Correlation Coefficient

Wayfair  Mister Car

Excellent diversification

The 3 months correlation between Wayfair and Mister is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Mister Car Wash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mister Car Wash 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 Mister Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mister Car Wash has no effect on the direction of Wayfair i.e., Wayfair and Mister Car go up and down completely randomly.

Pair Corralation between Wayfair and Mister Car

Taking into account the 90-day investment horizon Wayfair is expected to generate 2.2 times less return on investment than Mister Car. In addition to that, Wayfair is 1.45 times more volatile than Mister Car Wash. It trades about 0.05 of its total potential returns per unit of risk. Mister Car Wash is currently generating about 0.15 per unit of volatility. If you would invest  651.00  in Mister Car Wash on August 30, 2024 and sell it today you would earn a total of  158.00  from holding Mister Car Wash or generate 24.27% return on investment over 90 days.

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

Wayfair  vs.  Mister Car Wash

Wayfair

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wayfair are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Wayfair may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Mister Car Wash

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mister Car showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayfair and Mister Car

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

The idea behind Wayfair and Mister Car Wash 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.