Correlation Between EBay and Wayfair

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

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

Diversification Opportunities for EBay and Wayfair

0.12

Correlation Coefficient

EBay  Wayfair

Average diversification

The 3 months correlation between EBay and Wayfair is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair and EBay 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 eBay Inc are associated (or correlated) with Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of EBay i.e., EBay and Wayfair go up and down completely randomly.

Pair Corralation between EBay and Wayfair

Given the investment horizon of 90 days eBay Inc is expected to generate 0.34 times more return on investment than Wayfair. However, eBay Inc is 2.95 times less risky than Wayfair. It trades about 0.11 of its potential returns per unit of risk. Wayfair is currently generating about 0.01 per unit of risk. If you would invest  4,957  in eBay Inc on March 5, 2024 and sell it today you would earn a total of  465.00  from holding eBay Inc or generate 9.38% return on investment over 90 days.

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

eBay Inc  vs.  Wayfair

eBay Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Wayfair

Risk-Adjusted Performance

1 of 100

Very 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.

Pair Trading with EBay and Wayfair

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

The idea behind eBay Inc and Wayfair 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.