Correlation Between Tile Shop and Arhaus
Can any of the company-specific risk be diversified away by investing in both Tile Shop 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 Tile Shop and Arhaus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tile Shop Holdings and Arhaus Inc, you can compare the effects of market volatilities on Tile Shop 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 Tile Shop with a short position of Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Arhaus.
Diversification Opportunities for Tile Shop and Arhaus
Very good diversification
The 3 months correlation between Tile and Arhaus is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Tile Shop 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 Tile Shop 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 Tile Shop i.e., Tile Shop and Arhaus go up and down completely randomly.
Pair Corralation between Tile Shop and Arhaus
Given the investment horizon of 90 days Tile Shop is expected to generate 12.21 times less return on investment than Arhaus. But when comparing it to its historical volatility, Tile Shop Holdings is 1.08 times less risky than Arhaus. It trades about 0.02 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 873.00 in Arhaus Inc on August 25, 2024 and sell it today you would earn a total of 102.00 from holding Arhaus Inc or generate 11.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tile Shop Holdings vs. Arhaus Inc
Performance |
| Timeline |
| Tile Shop Holdings |
| Arhaus Inc |
Tile Shop and Arhaus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tile Shop and Arhaus
The main advantage of trading using opposite Tile Shop and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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.The idea behind Tile Shop Holdings and Arhaus Inc 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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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