Correlation Between Tile Shop and Arhaus

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

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

Diversification Opportunities for Tile Shop and Arhaus

-0.32

Correlation Coefficient

Tile Shop  Arhaus

Very good diversification

The 3 months correlation between Tile and Arhaus is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Tile Shop 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 Tile Shop Holdings 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 Tile Shop i.e., Tile Shop and Arhaus go up and down completely randomly.

Pair Corralation between Tile Shop and Arhaus

Given the investment horizon of 90 days Tile Shop Holdings is expected to generate 0.52 times more return on investment than Arhaus. However, Tile Shop Holdings is 1.93 times less risky than Arhaus. It trades about 0.1 of its potential returns per unit of risk. Arhaus Inc is currently generating about -0.06 per unit of risk. If you would invest  601.00  in Tile Shop Holdings on September 1, 2024 and sell it today you would earn a total of  62.00  from holding Tile Shop Holdings or generate 10.32% return on investment over 90 days.

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

Tile Shop Holdings  vs.  Arhaus Inc

Tile Shop Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tile Shop Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Tile Shop may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 conflicting performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tile Shop and Arhaus

The main advantage of trading using opposite Tile Shop and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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 Tile Shop Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.