Correlation Between Arhaus and Floor Decor

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

By analyzing existing cross correlation between Arhaus Inc and Floor Decor Holdings, you can compare the effects of market volatilities on Arhaus and Floor Decor 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 Floor Decor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arhaus and Floor Decor.

Diversification Opportunities for Arhaus and Floor Decor

-0.17

Correlation Coefficient

Arhaus  Floor Decor

Good diversification

The 3 months correlation between Arhaus and Floor is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings 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 Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of Arhaus i.e., Arhaus and Floor Decor go up and down completely randomly.

Pair Corralation between Arhaus and Floor Decor

Given the investment horizon of 90 days Arhaus Inc is expected to generate 1.75 times more return on investment than Floor Decor. However, Arhaus is 1.75 times more volatile than Floor Decor Holdings. It trades about 0.1 of its potential returns per unit of risk. Floor Decor Holdings is currently generating about -0.08 per unit of risk. If you would invest  993.00  in Arhaus Inc on November 28, 2024 and sell it today you would earn a total of  198.00  from holding Arhaus Inc or generate 19.94% return on investment over 90 days.

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

Arhaus Inc  vs.  Floor Decor Holdings

Arhaus Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 7 (%) 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.

Floor Decor Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Floor Decor Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Arhaus and Floor Decor

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

The idea behind Arhaus Inc and Floor Decor Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..