Correlation Between Arhaus and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Arhaus and Wesfarmers 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 Arhaus and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arhaus Inc and Wesfarmers Ltd ADR, you can compare the effects of market volatilities on Arhaus and Wesfarmers 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 Arhaus with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arhaus and Wesfarmers.
Diversification Opportunities for Arhaus and Wesfarmers
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arhaus and Wesfarmers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Wesfarmers Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers ADR and Arhaus 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 Arhaus Inc are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers ADR has no effect on the direction of Arhaus i.e., Arhaus and Wesfarmers go up and down completely randomly.
Pair Corralation between Arhaus and Wesfarmers
Given the investment horizon of 90 days Arhaus is expected to generate 1.31 times less return on investment than Wesfarmers. In addition to that, Arhaus is 2.58 times more volatile than Wesfarmers Ltd ADR. It trades about 0.02 of its total potential returns per unit of risk. Wesfarmers Ltd ADR is currently generating about 0.07 per unit of volatility. If you would invest 1,545 in Wesfarmers Ltd ADR on September 3, 2024 and sell it today you would earn a total of 801.00 from holding Wesfarmers Ltd ADR or generate 51.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arhaus Inc vs. Wesfarmers Ltd ADR
Performance |
| Timeline |
| Arhaus Inc |
| Wesfarmers ADR |
Arhaus and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arhaus and Wesfarmers
The main advantage of trading using opposite Arhaus and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arhaus position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.| Arhaus vs. Partner Communications | Arhaus vs. Merck Company | Arhaus vs. Western Midstream Partners | Arhaus vs. Edgewise Therapeutics |
| Wesfarmers vs. Haverty Furniture Companies | Wesfarmers vs. Arhaus Inc | Wesfarmers vs. Home Depot | Wesfarmers vs. Lowes Companies |
Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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