Correlation Between Kirklands and Arhaus

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

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

Diversification Opportunities for Kirklands and Arhaus

-0.56

Correlation Coefficient

Kirklands  Arhaus

Excellent diversification

The 3 months correlation between Kirklands and Arhaus is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kirklands and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Kirklands 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 Kirklands 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 Kirklands i.e., Kirklands and Arhaus go up and down completely randomly.

Pair Corralation between Kirklands and Arhaus

Given the investment horizon of 90 days Kirklands is expected to generate 2.1 times more return on investment than Arhaus. However, Kirklands is 2.1 times more volatile than Arhaus Inc. It trades about -0.12 of its potential returns per unit of risk. Arhaus Inc is currently generating about -0.29 per unit of risk. If you would invest  235.00  in Kirklands on February 3, 2024 and sell it today you would lose (39.00) from holding Kirklands or give up 16.6% of portfolio value over 90 days.

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

Kirklands  vs.  Arhaus Inc

Kirklands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kirklands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Arhaus Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Arhaus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kirklands and Arhaus

The main advantage of trading using opposite Kirklands and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kirklands 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 Kirklands 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 Stocks Directory module to find actively traded stocks across global markets.