Correlation Between Ethan Allen and Whirlpool

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

Diversification Opportunities for Ethan Allen and Whirlpool

-0.3

Correlation Coefficient

Ethan Allen  Whirlpool

Very good diversification

The 3 months correlation between Ethan and Whirlpool is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ethan Allen Interiors and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Ethan Allen i.e., Ethan Allen and Whirlpool go up and down completely randomly.

Pair Corralation between Ethan Allen and Whirlpool

Considering the 90-day investment horizon Ethan Allen Interiors is expected to under-perform the Whirlpool. But the stock apears to be less risky and, when comparing its historical volatility, Ethan Allen Interiors is 1.56 times less risky than Whirlpool. The stock trades about -0.05 of its potential returns per unit of risk. The Whirlpool is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10,886  in Whirlpool on December 1, 2024 and sell it today you would lose (707.00) from holding Whirlpool or give up 6.49% of portfolio value over 90 days.

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

Ethan Allen Interiors  vs.  Whirlpool

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Whirlpool

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Whirlpool is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ethan Allen and Whirlpool

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

The idea behind Ethan Allen Interiors and Whirlpool 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.