Correlation Between Hooker Furniture and Ethan Allen

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

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

Diversification Opportunities for Hooker Furniture and Ethan Allen

0.2

Correlation Coefficient

Hooker Furniture  Ethan Allen

Modest diversification

The 3 months correlation between Hooker and Ethan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and Ethan Allen Interiors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethan Allen Interiors and Hooker Furniture 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 Hooker Furniture are associated (or correlated) with Ethan Allen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethan Allen Interiors has no effect on the direction of Hooker Furniture i.e., Hooker Furniture and Ethan Allen go up and down completely randomly.

Pair Corralation between Hooker Furniture and Ethan Allen

Given the investment horizon of 90 days Hooker Furniture is expected to under-perform the Ethan Allen. But the stock apears to be less risky and, when comparing its historical volatility, Hooker Furniture is 1.05 times less risky than Ethan Allen. The stock trades about -0.18 of its potential returns per unit of risk. The Ethan Allen Interiors is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,735  in Ethan Allen Interiors on December 28, 2024 and sell it today you would earn a total of  53.00  from holding Ethan Allen Interiors or generate 1.94% return on investment over 90 days.

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

Hooker Furniture  vs.  Ethan Allen Interiors

Hooker Furniture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

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 2 (%) 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.

Pair Trading with Hooker Furniture and Ethan Allen

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

The idea behind Hooker Furniture and Ethan Allen Interiors 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.