Correlation Between Floor Decor and Arhaus
Can any of the company-specific risk be diversified away by investing in both Floor Decor and Arhaus 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 Floor Decor and Arhaus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floor Decor Holdings and Arhaus Inc, you can compare the effects of market volatilities on Floor Decor and Arhaus 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 Floor Decor with a short position of Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Arhaus.
Diversification Opportunities for Floor Decor and Arhaus
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Floor and Arhaus is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Floor Decor 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 Floor Decor Holdings are associated (or correlated) with Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of Floor Decor i.e., Floor Decor and Arhaus go up and down completely randomly.
Pair Corralation between Floor Decor and Arhaus
Considering the 90-day investment horizon Floor Decor is expected to generate 1.12 times less return on investment than Arhaus. But when comparing it to its historical volatility, Floor Decor Holdings is 1.05 times less risky than Arhaus. It trades about 0.18 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 874.00 in Arhaus Inc on August 28, 2024 and sell it today you would earn a total of 125.00 from holding Arhaus Inc or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Floor Decor Holdings vs. Arhaus Inc
Performance |
| Timeline |
| Floor Decor Holdings |
| Arhaus Inc |
Floor Decor and Arhaus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floor Decor and Arhaus
The main advantage of trading using opposite Floor Decor and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor position performs unexpectedly, Arhaus 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 Arhaus will offset losses from the drop in Arhaus' long position.| Floor Decor vs. Arhaus Inc | Floor Decor vs. Haverty Furniture Companies | Floor Decor vs. Kirklands | Floor Decor vs. Haverty Furniture 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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