Correlation Between Arhaus and Sleep Number

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

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

Diversification Opportunities for Arhaus and Sleep Number

0.79

Correlation Coefficient

Arhaus  Sleep Number

Poor diversification

The 3 months correlation between Arhaus and Sleep is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number 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 Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of Arhaus i.e., Arhaus and Sleep Number go up and down completely randomly.

Pair Corralation between Arhaus and Sleep Number

Given the investment horizon of 90 days Arhaus Inc is expected to generate 0.57 times more return on investment than Sleep Number. However, Arhaus Inc is 1.77 times less risky than Sleep Number. It trades about 0.03 of its potential returns per unit of risk. Sleep Number Corp is currently generating about -0.13 per unit of risk. If you would invest  928.00  in Arhaus Inc on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Arhaus Inc or generate 1.08% return on investment over 90 days.

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

Arhaus Inc  vs.  Sleep Number Corp

Arhaus Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Arhaus may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sleep Number Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sleep Number Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Arhaus and Sleep Number

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

The idea behind Arhaus Inc and Sleep Number 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.