Correlation Between Arhaus and Spot Coffee

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

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

Diversification Opportunities for Arhaus and Spot Coffee

-0.25

Correlation Coefficient

Arhaus  Spot Coffee

Very good diversification

The 3 months correlation between Arhaus and Spot is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Spot Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spot Coffee 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 Spot Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spot Coffee has no effect on the direction of Arhaus i.e., Arhaus and Spot Coffee go up and down completely randomly.

Pair Corralation between Arhaus and Spot Coffee

Given the investment horizon of 90 days Arhaus is expected to generate 56.45 times less return on investment than Spot Coffee. But when comparing it to its historical volatility, Arhaus Inc is 16.74 times less risky than Spot Coffee. It trades about 0.03 of its potential returns per unit of risk. Spot Coffee is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.25  in Spot Coffee on September 14, 2024 and sell it today you would lose (5.95) from holding Spot Coffee or give up 95.2% of portfolio value over 90 days.

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

Arhaus Inc  vs.  Spot Coffee

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.

Spot Coffee

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Spot Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arhaus and Spot Coffee

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

The idea behind Arhaus Inc and Spot Coffee 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.