Correlation Between Arhaus and Starco Brands

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

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

Diversification Opportunities for Arhaus and Starco Brands

-0.11

Correlation Coefficient

Arhaus  Starco Brands

Good diversification

The 3 months correlation between Arhaus and Starco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Starco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starco Brands 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 Starco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starco Brands has no effect on the direction of Arhaus i.e., Arhaus and Starco Brands go up and down completely randomly.

Pair Corralation between Arhaus and Starco Brands

Given the investment horizon of 90 days Arhaus Inc is expected to under-perform the Starco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Arhaus Inc is 3.15 times less risky than Starco Brands. The stock trades about -0.05 of its potential returns per unit of risk. The Starco Brands is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9.60  in Starco Brands on October 21, 2024 and sell it today you would lose (2.60) from holding Starco Brands or give up 27.08% 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.  Starco Brands

Arhaus Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Arhaus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Starco Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Starco Brands are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Starco Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arhaus and Starco Brands

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

The idea behind Arhaus Inc and Starco Brands 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.