Correlation Between Aarons and Arhaus
Can any of the company-specific risk be diversified away by investing in both Aarons 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 Aarons and Arhaus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Aarons and Arhaus Inc, you can compare the effects of market volatilities on Aarons 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 Aarons with a short position of Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarons and Arhaus.
Diversification Opportunities for Aarons and Arhaus
Good diversification
The 3 months correlation between Aarons and Arhaus is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Aarons 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 The Aarons 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 Aarons i.e., Aarons and Arhaus go up and down completely randomly.
Pair Corralation between Aarons and Arhaus
Considering the 90-day investment horizon Aarons is expected to generate 9.24 times less return on investment than Arhaus. But when comparing it to its historical volatility, The Aarons is 2.17 times less risky than Arhaus. It trades about 0.05 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,373 in Arhaus Inc on February 26, 2024 and sell it today you would earn a total of 307.00 from holding Arhaus Inc or generate 22.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
The Aarons vs. Arhaus Inc
Performance |
Timeline |
Aarons |
Arhaus Inc |
Aarons and Arhaus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aarons and Arhaus
The main advantage of trading using opposite Aarons and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons 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.Aarons vs. Floor Decor Holdings | Aarons vs. Live Ventures | Aarons vs. LL Flooring Holdings | Aarons vs. Home Depot |
Arhaus vs. Floor Decor Holdings | Arhaus vs. Live Ventures | Arhaus vs. LL Flooring Holdings | Arhaus vs. Home Depot |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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