Correlation Between Warby Parker and TheRealReal

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

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

Diversification Opportunities for Warby Parker and TheRealReal

0.76

Correlation Coefficient

Warby Parker  TheRealReal

Poor diversification

The 3 months correlation between Warby and TheRealReal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Warby Parker and TheRealReal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TheRealReal and Warby Parker 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 Warby Parker are associated (or correlated) with TheRealReal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TheRealReal has no effect on the direction of Warby Parker i.e., Warby Parker and TheRealReal go up and down completely randomly.

Pair Corralation between Warby Parker and TheRealReal

Given the investment horizon of 90 days Warby Parker is expected to generate 0.7 times more return on investment than TheRealReal. However, Warby Parker is 1.44 times less risky than TheRealReal. It trades about -0.1 of its potential returns per unit of risk. TheRealReal is currently generating about -0.19 per unit of risk. If you would invest  2,421  in Warby Parker on December 30, 2024 and sell it today you would lose (554.00) from holding Warby Parker or give up 22.88% of portfolio value over 90 days.

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

Warby Parker  vs.  TheRealReal

Warby Parker

Risk-Adjusted Performance

Very Weak

Over the last 90 days Warby Parker 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 fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TheRealReal

Risk-Adjusted Performance

Very Weak

Over the last 90 days TheRealReal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic 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 Warby Parker and TheRealReal

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

The idea behind Warby Parker and TheRealReal 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.