Correlation Between Crown Crafts and MasterBrand

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

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

Diversification Opportunities for Crown Crafts and MasterBrand

0.75

Correlation Coefficient

Crown Crafts  MasterBrand

Poor diversification

The 3 months correlation between Crown and MasterBrand is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Crown Crafts and MasterBrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasterBrand and Crown Crafts 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 Crown Crafts are associated (or correlated) with MasterBrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasterBrand has no effect on the direction of Crown Crafts i.e., Crown Crafts and MasterBrand go up and down completely randomly.

Pair Corralation between Crown Crafts and MasterBrand

Given the investment horizon of 90 days Crown Crafts is expected to under-perform the MasterBrand. But the stock apears to be less risky and, when comparing its historical volatility, Crown Crafts is 1.84 times less risky than MasterBrand. The stock trades about -0.23 of its potential returns per unit of risk. The MasterBrand is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,442  in MasterBrand on December 29, 2024 and sell it today you would lose (132.00) from holding MasterBrand or give up 9.15% of portfolio value over 90 days.

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

Crown Crafts  vs.  MasterBrand

Crown Crafts

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

MasterBrand

Risk-Adjusted Performance

Very Weak

Over the last 90 days MasterBrand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Crown Crafts and MasterBrand

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

The idea behind Crown Crafts and MasterBrand 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.