Correlation Between Cavco Industries and Arhaus

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

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

Diversification Opportunities for Cavco Industries and Arhaus

0.3

Correlation Coefficient

Cavco Industries  Arhaus

Weak diversification

The 3 months correlation between Cavco and Arhaus is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cavco Industries and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Cavco Industries 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 Cavco Industries are associated (or correlated) with Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of Cavco Industries i.e., Cavco Industries and Arhaus go up and down completely randomly.

Pair Corralation between Cavco Industries and Arhaus

Given the investment horizon of 90 days Cavco Industries is expected to generate 0.45 times more return on investment than Arhaus. However, Cavco Industries is 2.21 times less risky than Arhaus. It trades about 0.14 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.04 per unit of risk. If you would invest  44,928  in Cavco Industries on December 25, 2024 and sell it today you would earn a total of  7,320  from holding Cavco Industries or generate 16.29% return on investment over 90 days.

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

Cavco Industries  vs.  Arhaus Inc

Cavco Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cavco Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Cavco Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Arhaus Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 3 (%) 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.

Pair Trading with Cavco Industries and Arhaus

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

The idea behind Cavco Industries and Arhaus Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.