Correlation Between Haverty Furniture and Wesfarmers

Can any of the company-specific risk be diversified away by investing in both Haverty Furniture and Wesfarmers 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 Haverty Furniture and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haverty Furniture Companies and Wesfarmers Limited, you can compare the effects of market volatilities on Haverty Furniture and Wesfarmers 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 Haverty Furniture with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haverty Furniture and Wesfarmers.

Diversification Opportunities for Haverty Furniture and Wesfarmers

0.25

Correlation Coefficient

Haverty Furniture  Wesfarmers

Modest diversification

The 3 months correlation between Haverty and Wesfarmers is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Wesfarmers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers Limited and Haverty Furniture 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 Haverty Furniture Companies are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers Limited has no effect on the direction of Haverty Furniture i.e., Haverty Furniture and Wesfarmers go up and down completely randomly.

Pair Corralation between Haverty Furniture and Wesfarmers

Assuming the 90 days horizon Haverty Furniture Companies is expected to generate 1.3 times more return on investment than Wesfarmers. However, Haverty Furniture is 1.3 times more volatile than Wesfarmers Limited. It trades about 0.0 of its potential returns per unit of risk. Wesfarmers Limited is currently generating about -0.09 per unit of risk. If you would invest  2,089  in Haverty Furniture Companies on September 22, 2024 and sell it today you would lose (9.00) from holding Haverty Furniture Companies or give up 0.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Haverty Furniture Companies  vs.  Wesfarmers Limited

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Wesfarmers Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesfarmers Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wesfarmers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Haverty Furniture and Wesfarmers

The main advantage of trading using opposite Haverty Furniture and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haverty Furniture position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.

The idea behind Haverty Furniture Companies and Wesfarmers Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.