Correlation Between Ethan Allen and Crown Crafts

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

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

Diversification Opportunities for Ethan Allen and Crown Crafts

0.37

Correlation Coefficient

Ethan Allen  Crown Crafts

Weak diversification

The 3 months correlation between Ethan and Crown is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ethan Allen Interiors and Crown Crafts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Crafts and Ethan Allen 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 Ethan Allen Interiors 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 Ethan Allen i.e., Ethan Allen and Crown Crafts go up and down completely randomly.

Pair Corralation between Ethan Allen and Crown Crafts

Considering the 90-day investment horizon Ethan Allen Interiors is expected to generate 1.65 times more return on investment than Crown Crafts. However, Ethan Allen is 1.65 times more volatile than Crown Crafts. It trades about 0.01 of its potential returns per unit of risk. Crown Crafts is currently generating about -0.19 per unit of risk. If you would invest  2,755  in Ethan Allen Interiors on December 27, 2024 and sell it today you would earn a total of  11.00  from holding Ethan Allen Interiors or generate 0.4% return on investment over 90 days.

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

Ethan Allen Interiors  vs.  Crown Crafts

Ethan Allen Interiors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ethan Allen Interiors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ethan Allen is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Ethan Allen and Crown Crafts

The main advantage of trading using opposite Ethan Allen and Crown Crafts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethan Allen 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 Ethan Allen Interiors 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.