Correlation Between Arhaus and AutoNation

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

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

Diversification Opportunities for Arhaus and AutoNation

0.64

Correlation Coefficient

Arhaus  AutoNation

Poor diversification

The 3 months correlation between Arhaus and AutoNation is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation and Arhaus 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 are associated (or correlated) with AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Arhaus i.e., Arhaus and AutoNation go up and down completely randomly.

Pair Corralation between Arhaus and AutoNation

Given the investment horizon of 90 days Arhaus Inc is expected to under-perform the AutoNation. In addition to that, Arhaus is 1.71 times more volatile than AutoNation. It trades about -0.1 of its total potential returns per unit of risk. AutoNation is currently generating about 0.02 per unit of volatility. If you would invest  16,963  in AutoNation on September 17, 2024 and sell it today you would earn a total of  307.00  from holding AutoNation or generate 1.81% return on investment over 90 days.

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

Arhaus Inc  vs.  AutoNation

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 unsteady performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AutoNation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoNation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Arhaus and AutoNation

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

The idea behind Arhaus Inc and AutoNation 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.