Correlation Between Landsea Homes and Arhaus

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

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

Diversification Opportunities for Landsea Homes and Arhaus

0.44

Correlation Coefficient

Landsea Homes  Arhaus

Very weak diversification

The 3 months correlation between Landsea and Arhaus is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Landsea Homes and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Landsea Homes 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 Landsea Homes 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 Landsea Homes i.e., Landsea Homes and Arhaus go up and down completely randomly.

Pair Corralation between Landsea Homes and Arhaus

Assuming the 90 days horizon Landsea Homes is expected to under-perform the Arhaus. In addition to that, Landsea Homes is 2.55 times more volatile than Arhaus Inc. It trades about -0.12 of its total potential returns per unit of risk. Arhaus Inc is currently generating about -0.06 per unit of volatility. If you would invest  1,235  in Arhaus Inc on September 14, 2024 and sell it today you would lose (182.00) from holding Arhaus Inc or give up 14.74% of portfolio value over 90 days.

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

Landsea Homes  vs.  Arhaus Inc

Landsea Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landsea Homes 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 fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Landsea Homes and Arhaus

The main advantage of trading using opposite Landsea Homes and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Landsea Homes 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 Landsea Homes 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.