Correlation Between Arhaus and Legacy Housing

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

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

Diversification Opportunities for Arhaus and Legacy Housing

0.69

Correlation Coefficient

Arhaus  Legacy Housing

Poor diversification

The 3 months correlation between Arhaus and Legacy is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Legacy Housing Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Housing Corp 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 Legacy Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Housing Corp has no effect on the direction of Arhaus i.e., Arhaus and Legacy Housing go up and down completely randomly.

Pair Corralation between Arhaus and Legacy Housing

Given the investment horizon of 90 days Arhaus Inc is expected to under-perform the Legacy Housing. In addition to that, Arhaus is 1.86 times more volatile than Legacy Housing Corp. It trades about -0.06 of its total potential returns per unit of risk. Legacy Housing Corp is currently generating about -0.08 per unit of volatility. If you would invest  2,784  in Legacy Housing Corp on September 14, 2024 and sell it today you would lose (263.50) from holding Legacy Housing Corp or give up 9.46% of portfolio value over 90 days.

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

Arhaus Inc  vs.  Legacy Housing Corp

Arhaus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arhaus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Legacy Housing Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legacy Housing Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Arhaus and Legacy Housing

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

The idea behind Arhaus Inc and Legacy Housing Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.