Correlation Between Ethan Allen and Hamilton Beach

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

Diversification Opportunities for Ethan Allen and Hamilton Beach

0.4

Correlation Coefficient

Ethan Allen  Hamilton Beach

Very weak diversification

The 3 months correlation between Ethan and Hamilton is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ethan Allen Interiors and Hamilton Beach Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Beach Brands 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 Hamilton Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Beach Brands has no effect on the direction of Ethan Allen i.e., Ethan Allen and Hamilton Beach go up and down completely randomly.

Pair Corralation between Ethan Allen and Hamilton Beach

Considering the 90-day investment horizon Ethan Allen Interiors is expected to generate 0.47 times more return on investment than Hamilton Beach. However, Ethan Allen Interiors is 2.14 times less risky than Hamilton Beach. It trades about 0.02 of its potential returns per unit of risk. Hamilton Beach Brands is currently generating about -0.11 per unit of risk. If you would invest  3,019  in Ethan Allen Interiors on August 31, 2024 and sell it today you would earn a total of  56.00  from holding Ethan Allen Interiors or generate 1.85% return on investment over 90 days.

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

Ethan Allen Interiors  vs.  Hamilton Beach Brands

Ethan Allen Interiors

Risk-Adjusted Performance

1 of 100

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.

Hamilton Beach Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hamilton Beach Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ethan Allen and Hamilton Beach

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

The idea behind Ethan Allen Interiors and Hamilton Beach Brands 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.