Correlation Between Escalade Incorporated and Culp

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

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

Diversification Opportunities for Escalade Incorporated and Culp

-0.32

Correlation Coefficient

Escalade Incorporated  Culp

Very good diversification

The 3 months correlation between Escalade and Culp is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Culp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Culp Inc and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Culp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Culp Inc has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Culp go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Culp

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 1.24 times more return on investment than Culp. However, Escalade Incorporated is 1.24 times more volatile than Culp Inc. It trades about 0.11 of its potential returns per unit of risk. Culp Inc is currently generating about 0.03 per unit of risk. If you would invest  1,292  in Escalade Incorporated on September 5, 2024 and sell it today you would earn a total of  268.00  from holding Escalade Incorporated or generate 20.74% return on investment over 90 days.

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

Escalade Incorporated  vs.  Culp Inc

Escalade Incorporated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Escalade Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Culp Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Culp Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Culp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Escalade Incorporated and Culp

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

The idea behind Escalade Incorporated and Culp Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.