Correlation Between Floor Decor and Hiru

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

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

Diversification Opportunities for Floor Decor and Hiru

0.46

Correlation Coefficient

Floor Decor  Hiru

Very weak diversification

The 3 months correlation between Floor and Hiru is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Hiru Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiru and Floor Decor 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 Floor Decor Holdings are associated (or correlated) with Hiru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiru has no effect on the direction of Floor Decor i.e., Floor Decor and Hiru go up and down completely randomly.

Pair Corralation between Floor Decor and Hiru

Considering the 90-day investment horizon Floor Decor is expected to generate 10.63 times less return on investment than Hiru. But when comparing it to its historical volatility, Floor Decor Holdings is 6.79 times less risky than Hiru. It trades about 0.03 of its potential returns per unit of risk. Hiru Corporation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.47  in Hiru Corporation on September 12, 2024 and sell it today you would lose (0.34) from holding Hiru Corporation or give up 72.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.7%
Values	Daily Returns

Floor Decor Holdings  vs.  Hiru Corp.

Floor Decor Holdings

Risk-Adjusted Performance

2 of 100

Weak

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

Hiru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hiru Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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 Floor Decor and Hiru

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

The idea behind Floor Decor Holdings and Hiru Corporation 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.