Correlation Between Haverty Furniture and Meritage

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

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

Diversification Opportunities for Haverty Furniture and Meritage

0.14

Correlation Coefficient

Haverty Furniture  Meritage

Average diversification

The 3 months correlation between Haverty and Meritage is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Meritage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meritage and Haverty Furniture 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 Haverty Furniture Companies are associated (or correlated) with Meritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meritage has no effect on the direction of Haverty Furniture i.e., Haverty Furniture and Meritage go up and down completely randomly.

Pair Corralation between Haverty Furniture and Meritage

Assuming the 90 days horizon Haverty Furniture Companies is expected to generate 1.9 times more return on investment than Meritage. However, Haverty Furniture is 1.9 times more volatile than Meritage. It trades about 0.01 of its potential returns per unit of risk. Meritage is currently generating about -0.03 per unit of risk. If you would invest  2,155  in Haverty Furniture Companies on December 29, 2024 and sell it today you would lose (11.00) from holding Haverty Furniture Companies or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	49.18%
Values	Daily Returns

Haverty Furniture Companies  vs.  Meritage

Haverty Furniture

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Haverty Furniture Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Haverty Furniture is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Meritage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meritage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Meritage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Haverty Furniture and Meritage

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

The idea behind Haverty Furniture Companies and Meritage 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.