Correlation Between Arhaus and Leonardo Spa

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

By analyzing existing cross correlation between Arhaus Inc and Leonardo Spa, you can compare the effects of market volatilities on Arhaus and Leonardo Spa 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 Arhaus with a short position of Leonardo Spa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arhaus and Leonardo Spa.

Diversification Opportunities for Arhaus and Leonardo Spa

0.8

Correlation Coefficient

Arhaus  Leonardo Spa

Very poor diversification

The 3 months correlation between Arhaus and Leonardo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Leonardo Spa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo Spa and Arhaus 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 Arhaus Inc are associated (or correlated) with Leonardo Spa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo Spa has no effect on the direction of Arhaus i.e., Arhaus and Leonardo Spa go up and down completely randomly.

Pair Corralation between Arhaus and Leonardo Spa

Given the investment horizon of 90 days Arhaus Inc is expected to generate 1.04 times more return on investment than Leonardo Spa. However, Arhaus is 1.04 times more volatile than Leonardo Spa. It trades about 0.16 of its potential returns per unit of risk. Leonardo Spa is currently generating about 0.13 per unit of risk. If you would invest  878.00  in Arhaus Inc on October 25, 2024 and sell it today you would earn a total of  309.00  from holding Arhaus Inc or generate 35.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Arhaus Inc  vs.  Leonardo Spa

Arhaus Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Arhaus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Leonardo Spa

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo Spa are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Leonardo Spa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arhaus and Leonardo Spa

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

The idea behind Arhaus Inc and Leonardo Spa 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.