Can any of the company-specific risk be diversified away by investing in both 1StdibsCom 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 1StdibsCom and Haverty Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1StdibsCom and Haverty Furniture Companies, you can compare the effects of market volatilities on 1StdibsCom 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 1StdibsCom with a short position of Haverty Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1StdibsCom and Haverty Furniture.
Diversification Opportunities for 1StdibsCom and Haverty Furniture
The 3 months correlation between 1StdibsCom and Haverty is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding 1StdibsCom and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture and 1StdibsCom 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 1StdibsCom 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 1StdibsCom i.e., 1StdibsCom and Haverty Furniture go up and down completely randomly.
Pair Corralation between 1StdibsCom and Haverty Furniture
Given the investment horizon of 90 days 1StdibsCom is expected to generate 1.73 times less return on investment than Haverty Furniture. In addition to that, 1StdibsCom is 1.25 times more volatile than Haverty Furniture Companies. It trades about 0.12 of its total potential returns per unit of risk. Haverty Furniture Companies is currently generating about 0.25 per unit of volatility. If you would invest 2,885 in Haverty Furniture Companies on September 7, 2023 and sell it today you would earn a total of 323.00 from holding Haverty Furniture Companies or generate 11.2% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in 1StdibsCom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, 1StdibsCom is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Haverty Furniture Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Haverty Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.
1StdibsCom and Haverty Furniture Volatility Contrast
Predicted Return Density
Pair Trading with 1StdibsCom and Haverty Furniture
The main advantage of trading using opposite 1StdibsCom and Haverty Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1StdibsCom 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 1StdibsCom 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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