Correlation Between MasterBrand and Crown Crafts

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

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

Diversification Opportunities for MasterBrand and Crown Crafts

0.66

Correlation Coefficient

MasterBrand  Crown Crafts

Poor diversification

The 3 months correlation between MasterBrand and Crown is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MasterBrand and Crown Crafts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Crafts and MasterBrand 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 MasterBrand 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 MasterBrand i.e., MasterBrand and Crown Crafts go up and down completely randomly.

Pair Corralation between MasterBrand and Crown Crafts

Considering the 90-day investment horizon MasterBrand is expected to generate 1.84 times more return on investment than Crown Crafts. However, MasterBrand is 1.84 times more volatile than Crown Crafts. It trades about -0.06 of its potential returns per unit of risk. Crown Crafts is currently generating about -0.23 per unit of risk. If you would invest  1,442  in MasterBrand on December 29, 2024 and sell it today you would lose (132.00) from holding MasterBrand or give up 9.15% of portfolio value over 90 days.

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

MasterBrand  vs.  Crown Crafts

MasterBrand

Risk-Adjusted Performance

Very Weak

Over the last 90 days MasterBrand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 MasterBrand and Crown Crafts

The main advantage of trading using opposite MasterBrand and Crown Crafts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasterBrand 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 MasterBrand 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.