Correlation Between MasterBrand and Ethan Allen
Can any of the company-specific risk be diversified away by investing in both MasterBrand and Ethan Allen 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 MasterBrand and Ethan Allen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MasterBrand and Ethan Allen Interiors, you can compare the effects of market volatilities on MasterBrand and Ethan Allen 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 MasterBrand with a short position of Ethan Allen. Check out your portfolio center. Please also check ongoing floating volatility patterns of MasterBrand and Ethan Allen.
Diversification Opportunities for MasterBrand and Ethan Allen
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MasterBrand and Ethan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MasterBrand and Ethan Allen Interiors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethan Allen Interiors and MasterBrand 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 MasterBrand are associated (or correlated) with Ethan Allen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethan Allen Interiors has no effect on the direction of MasterBrand i.e., MasterBrand and Ethan Allen go up and down completely randomly.
Pair Corralation between MasterBrand and Ethan Allen
Considering the 90-day investment horizon MasterBrand is expected to generate 0.57 times more return on investment than Ethan Allen. However, MasterBrand is 1.75 times less risky than Ethan Allen. It trades about -0.14 of its potential returns per unit of risk. Ethan Allen Interiors is currently generating about -0.11 per unit of risk. If you would invest 1,842 in MasterBrand on February 4, 2024 and sell it today you would lose (114.00) from holding MasterBrand or give up 6.19% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
MasterBrand vs. Ethan Allen Interiors
Performance |
Timeline |
MasterBrand |
Ethan Allen Interiors |
MasterBrand and Ethan Allen Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MasterBrand and Ethan Allen
The main advantage of trading using opposite MasterBrand and Ethan Allen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasterBrand position performs unexpectedly, Ethan Allen 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 Ethan Allen will offset losses from the drop in Ethan Allen's long position.MasterBrand vs. FG Financial Group | MasterBrand vs. Yoshitsu Co Ltd | MasterBrand vs. Hour Loop | MasterBrand vs. Direct Digital Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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