Correlation Between Haverty Furniture and Arm Holdings

Can any of the company-specific risk be diversified away by investing in both Haverty Furniture and Arm Holdings 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 Arm Holdings 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 Arm Holdings plc, you can compare the effects of market volatilities on Haverty Furniture and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haverty Furniture and Arm Holdings.

Diversification Opportunities for Haverty Furniture and Arm Holdings

0.51

Correlation Coefficient

Haverty Furniture  Arm Holdings

Very weak diversification

The 3 months correlation between Haverty and Arm is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Haverty Furniture i.e., Haverty Furniture and Arm Holdings go up and down completely randomly.

Pair Corralation between Haverty Furniture and Arm Holdings

Considering the 90-day investment horizon Haverty Furniture is expected to generate 3.34 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, Haverty Furniture Companies is 1.6 times less risky than Arm Holdings. It trades about 0.01 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,065  in Arm Holdings plc on October 6, 2024 and sell it today you would earn a total of  43.00  from holding Arm Holdings plc or generate 0.31% return on investment over 90 days.

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

Haverty Furniture Companies  vs.  Arm Holdings plc

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Arm Holdings plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Haverty Furniture and Arm Holdings

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

The idea behind Haverty Furniture Companies and Arm Holdings plc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.