Correlation Between Genuine Parts and Arhaus

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

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

Diversification Opportunities for Genuine Parts and Arhaus

0.19

Correlation Coefficient

Genuine Parts  Arhaus

Average diversification

The 3 months correlation between Genuine and Arhaus is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Genuine Parts 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 Genuine Parts Co 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 Genuine Parts i.e., Genuine Parts and Arhaus go up and down completely randomly.

Pair Corralation between Genuine Parts and Arhaus

Considering the 90-day investment horizon Genuine Parts is expected to generate 17.65 times less return on investment than Arhaus. But when comparing it to its historical volatility, Genuine Parts Co is 4.43 times less risky than Arhaus. It trades about 0.1 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  941.00  in Arhaus Inc on October 26, 2024 and sell it today you would earn a total of  284.00  from holding Arhaus Inc or generate 30.18% return on investment over 90 days.

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

Genuine Parts Co  vs.  Arhaus Inc

Genuine Parts

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arhaus Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 13 (%) 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.

Pair Trading with Genuine Parts and Arhaus

The main advantage of trading using opposite Genuine Parts and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.