Correlation Between Arhaus and Landsea Homes

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

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

Diversification Opportunities for Arhaus and Landsea Homes

0.44

Correlation Coefficient

Arhaus  Landsea Homes

Very weak diversification

The 3 months correlation between Arhaus and Landsea is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Landsea Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes 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 Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes has no effect on the direction of Arhaus i.e., Arhaus and Landsea Homes go up and down completely randomly.

Pair Corralation between Arhaus and Landsea Homes

Given the investment horizon of 90 days Arhaus Inc is expected to generate 0.39 times more return on investment than Landsea Homes. However, Arhaus Inc is 2.55 times less risky than Landsea Homes. It trades about -0.06 of its potential returns per unit of risk. Landsea Homes is currently generating about -0.12 per unit of risk. If you would invest  1,235  in Arhaus Inc on September 14, 2024 and sell it today you would lose (182.00) from holding Arhaus Inc or give up 14.74% of portfolio value over 90 days.

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

Arhaus Inc  vs.  Landsea Homes

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.

Landsea Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landsea Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Arhaus and Landsea Homes

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

The idea behind Arhaus Inc and Landsea Homes 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.