Correlation Between Lowes Companies and Arhaus
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and Arhaus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Arhaus Inc, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Arhaus.
Diversification Opportunities for Lowes Companies and Arhaus
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lowes and Arhaus is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and Arhaus go up and down completely randomly.
Pair Corralation between Lowes Companies and Arhaus
Considering the 90-day investment horizon Lowes Companies is expected to under-perform the Arhaus. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 2.6 times less risky than Arhaus. The stock trades about -0.02 of its potential returns per unit of risk. The Arhaus Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 874.00 in Arhaus Inc on October 26, 2024 and sell it today you would earn a total of 351.00 from holding Arhaus Inc or generate 40.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Arhaus Inc
Performance |
| Timeline |
| Lowes Companies |
| Arhaus Inc |
Lowes Companies and Arhaus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Arhaus
The main advantage of trading using opposite Lowes Companies and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
| Arhaus vs. Floor Decor Holdings | Arhaus vs. Live Ventures | Arhaus vs. Haverty Furniture Companies | Arhaus vs. Home Depot |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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