Correlation Between Whirlpool and Ethan Allen

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

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

Diversification Opportunities for Whirlpool and Ethan Allen

0.44

Correlation Coefficient

Whirlpool  Ethan Allen

Very weak diversification

The 3 months correlation between Whirlpool and Ethan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool 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 Whirlpool 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 Whirlpool 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 Whirlpool i.e., Whirlpool and Ethan Allen go up and down completely randomly.

Pair Corralation between Whirlpool and Ethan Allen

Considering the 90-day investment horizon Whirlpool is expected to under-perform the Ethan Allen. But the stock apears to be less risky and, when comparing its historical volatility, Whirlpool is 1.27 times less risky than Ethan Allen. The stock trades about -0.38 of its potential returns per unit of risk. The Ethan Allen Interiors is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  3,405  in Ethan Allen Interiors on February 1, 2024 and sell it today you would lose (581.00) from holding Ethan Allen Interiors or give up 17.06% of portfolio value over 90 days.

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

Whirlpool  vs.  Ethan Allen Interiors

Whirlpool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ethan Allen Interiors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ethan Allen Interiors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ethan Allen is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Whirlpool and Ethan Allen

The main advantage of trading using opposite Whirlpool and Ethan Allen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whirlpool 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.

The idea behind Whirlpool and Ethan Allen Interiors 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.