Correlation Between Tile Shop and Haverty Furniture

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

Diversification Opportunities for Tile Shop and Haverty Furniture

0.41

Correlation Coefficient

Tile Shop  Haverty Furniture

Very weak diversification

The 3 months correlation between Tile and Haverty is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture 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 Haverty Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haverty Furniture has no effect on the direction of Tile Shop i.e., Tile Shop and Haverty Furniture go up and down completely randomly.

Pair Corralation between Tile Shop and Haverty Furniture

Given the investment horizon of 90 days Tile Shop Holdings is expected to under-perform the Haverty Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Tile Shop Holdings is 1.11 times less risky than Haverty Furniture. The stock trades about -0.03 of its potential returns per unit of risk. The Haverty Furniture Companies is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,166  in Haverty Furniture Companies on December 28, 2024 and sell it today you would lose (91.00) from holding Haverty Furniture Companies or give up 4.2% of portfolio value over 90 days.

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

Tile Shop Holdings  vs.  Haverty Furniture Companies

Tile Shop Holdings

Risk-Adjusted Performance

Very Weak

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

Haverty Furniture

Risk-Adjusted Performance

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 comparatively stable basic indicators, Haverty Furniture is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tile Shop and Haverty Furniture

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

The idea behind Tile Shop Holdings and Haverty Furniture Companies 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.