Correlation Between Wayfair and Carters

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

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

Diversification Opportunities for Wayfair and Carters

-0.64

Correlation Coefficient

Wayfair  Carters

Excellent diversification

The 3 months correlation between Wayfair and Carters is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of Wayfair i.e., Wayfair and Carters go up and down completely randomly.

Pair Corralation between Wayfair and Carters

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.06 times more return on investment than Carters. However, Wayfair is 1.06 times more volatile than Carters. It trades about 0.31 of its potential returns per unit of risk. Carters is currently generating about -0.12 per unit of risk. If you would invest  3,092  in Wayfair on May 5, 2025 and sell it today you would earn a total of  3,430  from holding Wayfair or generate 110.93% return on investment over 90 days.

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

Wayfair  vs.  Carters

Wayfair

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wayfair are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Wayfair showed solid returns over the last few months and may actually be approaching a breakup point.

Carters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in September 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Wayfair and Carters

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

The idea behind Wayfair and Carters 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.