Correlation Between Ethan Allen and FGI Industries

Can any of the company-specific risk be diversified away by investing in both Ethan Allen and FGI Industries 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 FGI Industries 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 FGI Industries, you can compare the effects of market volatilities on Ethan Allen and FGI Industries 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 FGI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethan Allen and FGI Industries.

Diversification Opportunities for Ethan Allen and FGI Industries

0.35

Correlation Coefficient

Ethan Allen  FGI Industries

Weak diversification

The 3 months correlation between Ethan and FGI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ethan Allen Interiors and FGI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGI Industries 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 FGI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGI Industries has no effect on the direction of Ethan Allen i.e., Ethan Allen and FGI Industries go up and down completely randomly.

Pair Corralation between Ethan Allen and FGI Industries

Considering the 90-day investment horizon Ethan Allen is expected to generate 42.71 times less return on investment than FGI Industries. But when comparing it to its historical volatility, Ethan Allen Interiors is 1.84 times less risky than FGI Industries. It trades about 0.0 of its potential returns per unit of risk. FGI Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  82.00  in FGI Industries on December 26, 2024 and sell it today you would earn a total of  7.00  from holding FGI Industries or generate 8.54% 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.  FGI Industries

Ethan Allen Interiors

Risk-Adjusted Performance

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

FGI Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FGI Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, FGI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethan Allen and FGI Industries

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

The idea behind Ethan Allen Interiors and FGI Industries 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.