Correlation Between Floor Decor and Haverty Furniture

Can any of the company-specific risk be diversified away by investing in both Floor Decor and Haverty Furniture 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 Haverty Furniture 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 Haverty Furniture Companies, you can compare the effects of market volatilities on Floor Decor and Haverty Furniture 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 Haverty Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floor Decor and Haverty Furniture.

Diversification Opportunities for Floor Decor and Haverty Furniture

-0.37

Correlation Coefficient

Floor Decor  Haverty Furniture

Very good diversification

The 3 months correlation between Floor and Haverty is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture 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 Haverty Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haverty Furniture has no effect on the direction of Floor Decor i.e., Floor Decor and Haverty Furniture go up and down completely randomly.

Pair Corralation between Floor Decor and Haverty Furniture

Considering the 90-day investment horizon Floor Decor is expected to generate 259.39 times less return on investment than Haverty Furniture. But when comparing it to its historical volatility, Floor Decor Holdings is 69.23 times less risky than Haverty Furniture. It trades about 0.04 of its potential returns per unit of risk. Haverty Furniture Companies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Haverty Furniture Companies on September 4, 2024 and sell it today you would earn a total of  2,411  from holding Haverty Furniture Companies or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.25%
Values	Daily Returns

Floor Decor Holdings  vs.  Haverty Furniture Companies

Floor Decor Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Floor Decor Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Floor Decor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain basic indicators, Haverty Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Floor Decor and Haverty Furniture

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

The idea behind Floor Decor Holdings and Haverty Furniture Companies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.