Correlation Between Wayfair and Arhaus
Can any of the company-specific risk be diversified away by investing in both Wayfair 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 Wayfair and Arhaus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wayfair and Arhaus Inc, you can compare the effects of market volatilities on Wayfair 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 Wayfair with a short position of Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wayfair and Arhaus.
Diversification Opportunities for Wayfair and Arhaus
Poor diversification
The 3 months correlation between Wayfair and Arhaus is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wayfair and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Wayfair 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 Wayfair 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 Wayfair i.e., Wayfair and Arhaus go up and down completely randomly.
Pair Corralation between Wayfair and Arhaus
Taking into account the 90-day investment horizon Wayfair is expected to generate 0.96 times more return on investment than Arhaus. However, Wayfair is 1.04 times less risky than Arhaus. It trades about 0.31 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.15 per unit of risk. If you would invest 4,026 in Wayfair on September 19, 2024 and sell it today you would earn a total of 1,016 from holding Wayfair or generate 25.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wayfair vs. Arhaus Inc
Performance |
| Timeline |
| Wayfair |
| Arhaus Inc |
Wayfair and Arhaus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wayfair and Arhaus
The main advantage of trading using opposite Wayfair and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayfair 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.| Wayfair vs. Floor Decor Holdings | Wayfair vs. Live Ventures | Wayfair vs. Home Depot | Wayfair vs. Lowes Companies |
| Arhaus vs. Floor Decor Holdings | Arhaus vs. Live Ventures | Arhaus vs. Home Depot | Arhaus 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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