Correlation Between RH and Pet Acquisition

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

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

Diversification Opportunities for RH and Pet Acquisition

0.25

Correlation Coefficient

RH  Pet Acquisition

Modest diversification

The 3 months correlation between RH and Pet is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding RH and Pet Acquisition LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Acquisition LLC and RH 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 RH are associated (or correlated) with Pet Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Acquisition LLC has no effect on the direction of RH i.e., RH and Pet Acquisition go up and down completely randomly.

Pair Corralation between RH and Pet Acquisition

Allowing for the 90-day total investment horizon RH is expected to generate 0.63 times more return on investment than Pet Acquisition. However, RH is 1.59 times less risky than Pet Acquisition. It trades about 0.06 of its potential returns per unit of risk. Pet Acquisition LLC is currently generating about 0.02 per unit of risk. If you would invest  18,287  in RH on May 6, 2025 and sell it today you would earn a total of  1,789  from holding RH or generate 9.78% return on investment over 90 days.

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

RH  vs.  Pet Acquisition LLC

RH

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pet Acquisition LLC

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pet Acquisition LLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Pet Acquisition may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with RH and Pet Acquisition

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

The idea behind RH and Pet Acquisition LLC 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.