Correlation Between Haverty Furniture and Topbuild Corp

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

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

Diversification Opportunities for Haverty Furniture and Topbuild Corp

0.8

Correlation Coefficient

Haverty Furniture  Topbuild Corp

Very poor diversification

The 3 months correlation between Haverty and Topbuild is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and Haverty Furniture 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 Haverty Furniture Companies are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Haverty Furniture i.e., Haverty Furniture and Topbuild Corp go up and down completely randomly.

Pair Corralation between Haverty Furniture and Topbuild Corp

Considering the 90-day investment horizon Haverty Furniture Companies is expected to under-perform the Topbuild Corp. But the stock apears to be less risky and, when comparing its historical volatility, Haverty Furniture Companies is 1.14 times less risky than Topbuild Corp. The stock trades about -0.07 of its potential returns per unit of risk. The Topbuild Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  39,202  in Topbuild Corp on September 14, 2024 and sell it today you would lose (3,486) from holding Topbuild Corp or give up 8.89% of portfolio value over 90 days.

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

Haverty Furniture Companies  vs.  Topbuild Corp

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Topbuild Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Haverty Furniture and Topbuild Corp

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

The idea behind Haverty Furniture Companies and Topbuild Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..