Correlation Between Haverty Furniture and Floor Decor

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

Diversification Opportunities for Haverty Furniture and Floor Decor

0.29

Correlation Coefficient

Haverty Furniture  Floor Decor

Modest diversification

The 3 months correlation between Haverty and Floor is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings 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 Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of Haverty Furniture i.e., Haverty Furniture and Floor Decor go up and down completely randomly.

Pair Corralation between Haverty Furniture and Floor Decor

Considering the 90-day investment horizon Haverty Furniture Companies is expected to under-perform the Floor Decor. In addition to that, Haverty Furniture is 1.21 times more volatile than Floor Decor Holdings. It trades about -0.01 of its total potential returns per unit of risk. Floor Decor Holdings is currently generating about 0.24 per unit of volatility. If you would invest  11,244  in Floor Decor Holdings on July 1, 2024 and sell it today you would earn a total of  1,033  from holding Floor Decor Holdings or generate 9.19% return on investment over 90 days.

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

Haverty Furniture Companies  vs.  Floor Decor Holdings

Haverty Furniture

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haverty Furniture Companies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Haverty Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Floor Decor Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Floor Decor Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Floor Decor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haverty Furniture and Floor Decor

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

The idea behind Haverty Furniture Companies and Floor Decor Holdings 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.