Correlation Between MasterBrand and Hooker Furniture

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

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

Diversification Opportunities for MasterBrand and Hooker Furniture

-0.12

Correlation Coefficient

MasterBrand  Hooker Furniture

Good diversification

The 3 months correlation between MasterBrand and Hooker is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding MasterBrand and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of MasterBrand i.e., MasterBrand and Hooker Furniture go up and down completely randomly.

Pair Corralation between MasterBrand and Hooker Furniture

Considering the 90-day investment horizon MasterBrand is expected to under-perform the Hooker Furniture. But the stock apears to be less risky and, when comparing its historical volatility, MasterBrand is 1.53 times less risky than Hooker Furniture. The stock trades about -0.02 of its potential returns per unit of risk. The Hooker Furniture is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,667  in Hooker Furniture on September 15, 2024 and sell it today you would earn a total of  26.00  from holding Hooker Furniture or generate 1.56% return on investment over 90 days.

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

MasterBrand  vs.  Hooker Furniture

MasterBrand

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental drivers, MasterBrand is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hooker Furniture

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hooker Furniture are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Hooker Furniture is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MasterBrand and Hooker Furniture

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

The idea behind MasterBrand and Hooker Furniture 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.