Correlation Between Arhaus Inc and Home Depot

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Can any of the company-specific risk be diversified away by investing in both Arhaus Inc and Home Depot 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 Arhaus Inc and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arhaus Inc Cl and Home Depot, you can compare the effects of market volatilities on Arhaus Inc and Home Depot 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 Arhaus Inc with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arhaus Inc and Home Depot.

Diversification Opportunities for Arhaus Inc and Home Depot

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Arhaus and Home Depot is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc Cl and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Arhaus Inc 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 Arhaus Inc Cl are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Arhaus Inc i.e., Arhaus Inc and Home Depot go up and down completely randomly.

Pair Corralation between Arhaus Inc and Home Depot

Given the investment horizon of 90 days Arhaus Inc Cl is expected to generate 2.71 times more return on investment than Home Depot. However, Arhaus Inc is 2.71 times more volatile than Home Depot. It trades about 0.2 of its potential returns per unit of risk. Home Depot is currently generating about 0.03 per unit of risk. If you would invest  450.00  in Arhaus Inc Cl on June 30, 2022 and sell it today you would earn a total of  307.00  from holding Arhaus Inc Cl or generate 68.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Arhaus Inc Cl  vs.  Home Depot

 Performance (%) 
       Timeline  
Arhaus Inc Cl 
Arhaus Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc Cl are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Arhaus Inc reported solid returns over the last few months and may actually be approaching a breakup point.

Arhaus Price Channel

Home Depot 
Home Depot Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

Arhaus Inc and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arhaus Inc and Home Depot

The main advantage of trading using opposite Arhaus Inc and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arhaus Inc position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.
Arhaus Inc vs. Johnson Johnson
The idea behind Arhaus Inc Cl and Home Depot 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.
Home Depot vs. Johnson Johnson
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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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