Correlation Between DR Horton and Arhaus

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

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

Diversification Opportunities for DR Horton and Arhaus

0.46

Correlation Coefficient

DR Horton  Arhaus

Very weak diversification

The 3 months correlation between DHI and Arhaus is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and DR Horton 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 DR Horton 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 DR Horton i.e., DR Horton and Arhaus go up and down completely randomly.

Pair Corralation between DR Horton and Arhaus

Considering the 90-day investment horizon DR Horton is expected to generate 0.61 times more return on investment than Arhaus. However, DR Horton is 1.64 times less risky than Arhaus. It trades about -0.21 of its potential returns per unit of risk. Arhaus Inc is currently generating about -0.13 per unit of risk. If you would invest  19,373  in DR Horton on September 18, 2024 and sell it today you would lose (4,612) from holding DR Horton or give up 23.81% of portfolio value over 90 days.

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

DR Horton  vs.  Arhaus Inc

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with DR Horton and Arhaus

The main advantage of trading using opposite DR Horton and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DR Horton 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.

The idea behind DR Horton and Arhaus Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.