Correlation Between Hooker Furniture and CARPENTER

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

By analyzing existing cross correlation between Hooker Furniture and CARPENTER TECHNOLOGY P, you can compare the effects of market volatilities on Hooker Furniture and CARPENTER 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 CARPENTER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hooker Furniture and CARPENTER.

Diversification Opportunities for Hooker Furniture and CARPENTER

-0.15

Correlation Coefficient

Hooker Furniture  CARPENTER

Good diversification

The 3 months correlation between Hooker and CARPENTER is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY 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 CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of Hooker Furniture i.e., Hooker Furniture and CARPENTER go up and down completely randomly.

Pair Corralation between Hooker Furniture and CARPENTER

Given the investment horizon of 90 days Hooker Furniture is expected to generate 6.67 times more return on investment than CARPENTER. However, Hooker Furniture is 6.67 times more volatile than CARPENTER TECHNOLOGY P. It trades about 0.04 of its potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about -0.01 per unit of risk. If you would invest  1,689  in Hooker Furniture on September 14, 2024 and sell it today you would earn a total of  93.00  from holding Hooker Furniture or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Hooker Furniture  vs.  CARPENTER TECHNOLOGY P

Hooker Furniture

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hooker Furniture are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Hooker Furniture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hooker Furniture and CARPENTER

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

The idea behind Hooker Furniture and CARPENTER TECHNOLOGY P 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.