Correlation Between Wayfair and Bang Olufsen

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

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

Diversification Opportunities for Wayfair and Bang Olufsen

-0.43

Correlation Coefficient

Wayfair  Bang Olufsen

Very good diversification

The 3 months correlation between Wayfair and Bang is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Bang Olufsen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bang Olufsen 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 Bang Olufsen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bang Olufsen has no effect on the direction of Wayfair i.e., Wayfair and Bang Olufsen go up and down completely randomly.

Pair Corralation between Wayfair and Bang Olufsen

Taking into account the 90-day investment horizon Wayfair is expected to under-perform the Bang Olufsen. In addition to that, Wayfair is 1.96 times more volatile than Bang Olufsen. It trades about -0.22 of its total potential returns per unit of risk. Bang Olufsen is currently generating about 0.12 per unit of volatility. If you would invest  916.00  in Bang Olufsen on January 24, 2024 and sell it today you would earn a total of  29.00  from holding Bang Olufsen or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Wayfair  vs.  Bang Olufsen

Wayfair

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wayfair are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wayfair is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bang Olufsen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bang Olufsen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Bang Olufsen is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wayfair and Bang Olufsen

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

The idea behind Wayfair and Bang Olufsen 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 Anywhere module to track or share privately all of your investments from the convenience of any device.