Correlation Between Wayfair and Sydbank AS

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

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

Diversification Opportunities for Wayfair and Sydbank AS

0.7

Correlation Coefficient

Wayfair  Sydbank AS

Poor diversification

The 3 months correlation between Wayfair and Sydbank is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Sydbank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank AS 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 Sydbank AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank AS has no effect on the direction of Wayfair i.e., Wayfair and Sydbank AS go up and down completely randomly.

Pair Corralation between Wayfair and Sydbank AS

Taking into account the 90-day investment horizon Wayfair is expected to generate 1.71 times less return on investment than Sydbank AS. In addition to that, Wayfair is 3.28 times more volatile than Sydbank AS. It trades about 0.01 of its total potential returns per unit of risk. Sydbank AS is currently generating about 0.07 per unit of volatility. If you would invest  21,448  in Sydbank AS on January 24, 2024 and sell it today you would earn a total of  14,732  from holding Sydbank AS or generate 68.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Wayfair  vs.  Sydbank AS

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.

Sydbank AS

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Sydbank AS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wayfair and Sydbank AS

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

The idea behind Wayfair and Sydbank AS 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..