Correlation Between Wayfair and Warby Parker

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

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

Diversification Opportunities for Wayfair and Warby Parker

-0.38

Correlation Coefficient

Wayfair  Warby Parker

Very good diversification

The 3 months correlation between Wayfair and Warby is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Warby Parker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warby Parker 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 Warby Parker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warby Parker has no effect on the direction of Wayfair i.e., Wayfair and Warby Parker go up and down completely randomly.

Pair Corralation between Wayfair and Warby Parker

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Warby Parker. In addition to that, Wayfair is 1.4 times more volatile than Warby Parker. It trades about -0.05 of its total potential returns per unit of risk. Warby Parker is currently generating about 0.29 per unit of volatility. If you would invest  1,609  in Warby Parker on September 26, 2024 and sell it today you would earn a total of  963.00  from holding Warby Parker or generate 59.85% return on investment over 90 days.

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

Wayfair  vs.  Warby Parker

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Warby Parker

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Warby Parker are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Warby Parker showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayfair and Warby Parker

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

The idea behind Wayfair and Warby Parker 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.