Correlation Between Leggett Platt and Ethan Allen

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

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

Diversification Opportunities for Leggett Platt and Ethan Allen

0.62

Correlation Coefficient

Leggett Platt  Ethan Allen

Poor diversification

The 3 months correlation between Leggett and Ethan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated 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 Leggett Platt 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 Leggett Platt Incorporated 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 Leggett Platt i.e., Leggett Platt and Ethan Allen go up and down completely randomly.

Pair Corralation between Leggett Platt and Ethan Allen

Considering the 90-day investment horizon Leggett Platt Incorporated is expected to under-perform the Ethan Allen. In addition to that, Leggett Platt is 1.21 times more volatile than Ethan Allen Interiors. It trades about -0.1 of its total potential returns per unit of risk. Ethan Allen Interiors is currently generating about 0.01 per unit of volatility. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Leggett Platt Incorporated  vs.  Ethan Allen Interiors

Leggett Platt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leggett Platt Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Leggett Platt and Ethan Allen

The main advantage of trading using opposite Leggett Platt and Ethan Allen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggett Platt 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 Leggett Platt Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.