Correlation Between Escalade Incorporated and Funko

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

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

Diversification Opportunities for Escalade Incorporated and Funko

-0.1

Correlation Coefficient

Escalade Incorporated  Funko

Good diversification

The 3 months correlation between Escalade and Funko is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Funko go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Funko

Given the investment horizon of 90 days Escalade Incorporated is expected to under-perform the Funko. But the stock apears to be less risky and, when comparing its historical volatility, Escalade Incorporated is 1.09 times less risky than Funko. The stock trades about -0.18 of its potential returns per unit of risk. The Funko Inc is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,150  in Funko Inc on October 11, 2024 and sell it today you would earn a total of  300.00  from holding Funko Inc or generate 26.09% return on investment over 90 days.

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

Escalade Incorporated  vs.  Funko Inc

Escalade Incorporated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Funko Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward-looking signals, Funko displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Escalade Incorporated and Funko

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

The idea behind Escalade Incorporated and Funko Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.