Correlation Between Arhaus and Plum Acquisition

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

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

Diversification Opportunities for Arhaus and Plum Acquisition

-0.19

Correlation Coefficient

Arhaus  Plum Acquisition

Good diversification

The 3 months correlation between Arhaus and Plum is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of Arhaus i.e., Arhaus and Plum Acquisition go up and down completely randomly.

Pair Corralation between Arhaus and Plum Acquisition

Given the investment horizon of 90 days Arhaus Inc is expected to generate 1.23 times more return on investment than Plum Acquisition. However, Arhaus is 1.23 times more volatile than Plum Acquisition Corp. It trades about 0.0 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about -0.02 per unit of risk. If you would invest  964.00  in Arhaus Inc on December 20, 2024 and sell it today you would lose (44.00) from holding Arhaus Inc or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	51.67%
Values	Daily Returns

Arhaus Inc  vs.  Plum Acquisition Corp

Arhaus Inc

Risk-Adjusted Performance

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 comparatively stable technical indicators, Arhaus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Plum Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plum Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, Plum Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arhaus and Plum Acquisition

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

The idea behind Arhaus Inc and Plum Acquisition 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.