Correlation Between RH and Floor Decor
Can any of the company-specific risk be diversified away by investing in both RH and Floor Decor 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 RH and Floor Decor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RH and Floor Decor Holdings, you can compare the effects of market volatilities on RH and Floor Decor 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 RH with a short position of Floor Decor. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Floor Decor.
Diversification Opportunities for RH and Floor Decor
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RH and Floor is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding RH and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings and RH 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 RH are associated (or correlated) with Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of RH i.e., RH and Floor Decor go up and down completely randomly.
Pair Corralation between RH and Floor Decor
Allowing for the 90-day total investment horizon RH is expected to generate 1.5 times more return on investment than Floor Decor. However, RH is 1.5 times more volatile than Floor Decor Holdings. It trades about 0.02 of its potential returns per unit of risk. Floor Decor Holdings is currently generating about 0.01 per unit of risk. If you would invest 24,642 in RH on December 6, 2024 and sell it today you would earn a total of 3,455 from holding RH or generate 14.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RH vs. Floor Decor Holdings
Performance |
| Timeline |
| RH |
| Floor Decor Holdings |
RH and Floor Decor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RH and Floor Decor
The main advantage of trading using opposite RH and Floor Decor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH position performs unexpectedly, Floor Decor 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 Floor Decor will offset losses from the drop in Floor Decor's long position.The idea behind RH and Floor Decor Holdings 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.| Floor Decor vs. Arhaus Inc | Floor Decor vs. Live Ventures | Floor Decor vs. Haverty Furniture Companies | 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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