Correlation Between Weyco and Sleep Number

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

By analyzing existing cross correlation between Weyco Group and Sleep Number Corp, you can compare the effects of market volatilities on Weyco and Sleep Number 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 Weyco with a short position of Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Sleep Number.

Diversification Opportunities for Weyco and Sleep Number

-0.1

Correlation Coefficient

Weyco  Sleep Number

Good diversification

The 3 months correlation between Weyco and Sleep is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number Corp and Weyco 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 Weyco Group are associated (or correlated) with Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of Weyco i.e., Weyco and Sleep Number go up and down completely randomly.

Pair Corralation between Weyco and Sleep Number

Given the investment horizon of 90 days Weyco Group is expected to generate 0.39 times more return on investment than Sleep Number. However, Weyco Group is 2.54 times less risky than Sleep Number. It trades about 0.04 of its potential returns per unit of risk. Sleep Number Corp is currently generating about 0.0 per unit of risk. If you would invest  2,471  in Weyco Group on October 21, 2024 and sell it today you would earn a total of  1,057  from holding Weyco Group or generate 42.78% return on investment over 90 days.

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

Weyco Group  vs.  Sleep Number Corp

Weyco Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Weyco is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sleep Number Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sleep Number Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, Sleep Number reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weyco and Sleep Number

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

The idea behind Weyco Group and Sleep Number 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.