Correlation Between Wayfair and Kidpik Corp

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

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

Diversification Opportunities for Wayfair and Kidpik Corp

0.5

Correlation Coefficient

Wayfair  Kidpik Corp

Very weak diversification

The 3 months correlation between Wayfair and Kidpik is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Kidpik Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kidpik 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 Kidpik Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kidpik Corp has no effect on the direction of Wayfair i.e., Wayfair and Kidpik Corp go up and down completely randomly.

Pair Corralation between Wayfair and Kidpik Corp

Taking into account the 90-day investment horizon Wayfair is expected to generate 0.21 times more return on investment than Kidpik Corp. However, Wayfair is 4.84 times less risky than Kidpik Corp. It trades about -0.07 of its potential returns per unit of risk. Kidpik Corp is currently generating about -0.18 per unit of risk. If you would invest  4,462  in Wayfair on December 28, 2024 and sell it today you would lose (901.00) from holding Wayfair or give up 20.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.67%
Values	Daily Returns

Wayfair  vs.  Kidpik Corp

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.

Kidpik Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kidpik Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Wayfair and Kidpik Corp

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

The idea behind Wayfair and Kidpik 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.