Correlation Between Wesfarmers and Arhaus
Can any of the company-specific risk be diversified away by investing in both Wesfarmers 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 Wesfarmers and Arhaus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers Ltd ADR and Arhaus Inc, you can compare the effects of market volatilities on Wesfarmers 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 Wesfarmers with a short position of Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Arhaus.
Diversification Opportunities for Wesfarmers and Arhaus
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wesfarmers and Arhaus is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers Ltd ADR and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Wesfarmers 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 Wesfarmers Ltd ADR 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 Wesfarmers i.e., Wesfarmers and Arhaus go up and down completely randomly.
Pair Corralation between Wesfarmers and Arhaus
Assuming the 90 days horizon Wesfarmers is expected to generate 4.36 times less return on investment than Arhaus. But when comparing it to its historical volatility, Wesfarmers Ltd ADR is 1.62 times less risky than Arhaus. It trades about 0.12 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 975.00 in Arhaus Inc on November 5, 2024 and sell it today you would earn a total of 253.00 from holding Arhaus Inc or generate 25.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers Ltd ADR vs. Arhaus Inc
Performance |
| Timeline |
| Wesfarmers ADR |
| Arhaus Inc |
Wesfarmers and Arhaus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Arhaus
The main advantage of trading using opposite Wesfarmers and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers 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.| Wesfarmers vs. Haverty Furniture Companies | Wesfarmers vs. Arhaus Inc | Wesfarmers vs. Home Depot | Wesfarmers vs. Lowes Companies |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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