Correlation Between Wayfair and Ross Stores

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

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

Diversification Opportunities for Wayfair and Ross Stores

0.53

Correlation Coefficient

Wayfair  Ross Stores

Very weak diversification

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

Pair Corralation between Wayfair and Ross Stores

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.8 times less return on investment than Ross Stores. In addition to that, Wayfair is 2.8 times more volatile than Ross Stores. It trades about 0.01 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of volatility. If you would invest  14,490  in Ross Stores on September 23, 2024 and sell it today you would earn a total of  425.00  from holding Ross Stores or generate 2.93% return on investment over 90 days.

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

Wayfair  vs.  Ross Stores

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.

Ross Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wayfair and Ross Stores

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

The idea behind Wayfair and Ross Stores 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 Commodity Directory module to find actively traded commodities issued by global exchanges.