Correlation Between Legacy Housing and Arhaus

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

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

Diversification Opportunities for Legacy Housing and Arhaus

0.69

Correlation Coefficient

Legacy Housing  Arhaus

Poor diversification

The 3 months correlation between Legacy and Arhaus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Housing Corp and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Legacy Housing 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 Legacy Housing Corp 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 Legacy Housing i.e., Legacy Housing and Arhaus go up and down completely randomly.

Pair Corralation between Legacy Housing and Arhaus

Given the investment horizon of 90 days Legacy Housing is expected to generate 1.99 times less return on investment than Arhaus. But when comparing it to its historical volatility, Legacy Housing Corp is 1.4 times less risky than Arhaus. It trades about 0.03 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  717.00  in Arhaus Inc on September 14, 2024 and sell it today you would earn a total of  365.00  from holding Arhaus Inc or generate 50.91% return on investment over 90 days.

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

Legacy Housing Corp  vs.  Arhaus Inc

Legacy Housing Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legacy Housing Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Arhaus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arhaus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Legacy Housing and Arhaus

The main advantage of trading using opposite Legacy Housing and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Housing 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 Legacy Housing Corp 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.