Correlation Between Floor Decor and Williams Sonoma

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

By analyzing existing cross correlation between Floor Decor Holdings and Williams Sonoma, you can compare the effects of market volatilities on Floor Decor and Williams Sonoma 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 Floor Decor with a short position of Williams Sonoma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Williams Sonoma.

Diversification Opportunities for Floor Decor and Williams Sonoma

0.16

Correlation Coefficient

Floor Decor  Williams Sonoma

Average diversification

The 3 months correlation between Floor and Williams is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Williams Sonoma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Sonoma and Floor Decor 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 Floor Decor Holdings are associated (or correlated) with Williams Sonoma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Sonoma has no effect on the direction of Floor Decor i.e., Floor Decor and Williams Sonoma go up and down completely randomly.

Pair Corralation between Floor Decor and Williams Sonoma

Considering the 90-day investment horizon Floor Decor Holdings is expected to under-perform the Williams Sonoma. In addition to that, Floor Decor is 1.0 times more volatile than Williams Sonoma. It trades about -0.23 of its total potential returns per unit of risk. Williams Sonoma is currently generating about 0.11 per unit of volatility. If you would invest  17,738  in Williams Sonoma on October 1, 2024 and sell it today you would earn a total of  867.00  from holding Williams Sonoma or generate 4.89% return on investment over 90 days.

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

Floor Decor Holdings  vs.  Williams Sonoma

Floor Decor Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Floor Decor Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Williams Sonoma

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Floor Decor and Williams Sonoma

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

The idea behind Floor Decor Holdings and Williams Sonoma 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.