Correlation Between Flexsteel Industries and Crown Crafts

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

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

Diversification Opportunities for Flexsteel Industries and Crown Crafts

-0.08

Correlation Coefficient

Flexsteel Industries  Crown Crafts

Good diversification

The 3 months correlation between Flexsteel and Crown is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and Crown Crafts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Crafts and Flexsteel Industries 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 Flexsteel Industries are associated (or correlated) with Crown Crafts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Crafts has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and Crown Crafts go up and down completely randomly.

Pair Corralation between Flexsteel Industries and Crown Crafts

Given the investment horizon of 90 days Flexsteel Industries is expected to generate 2.37 times more return on investment than Crown Crafts. However, Flexsteel Industries is 2.37 times more volatile than Crown Crafts. It trades about 0.05 of its potential returns per unit of risk. Crown Crafts is currently generating about -0.15 per unit of risk. If you would invest  3,558  in Flexsteel Industries on February 3, 2024 and sell it today you would earn a total of  174.00  from holding Flexsteel Industries or generate 4.89% return on investment over 90 days.

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

Flexsteel Industries  vs.  Crown Crafts

Flexsteel Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flexsteel Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flexsteel Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Crown Crafts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Crafts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Crown Crafts is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Flexsteel Industries and Crown Crafts

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

The idea behind Flexsteel Industries and Crown Crafts 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.