Correlation Between Ethan Allen and Applied UV

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

Diversification Opportunities for Ethan Allen and Applied UV

-0.62

Correlation Coefficient

Ethan Allen  Applied UV

Excellent diversification

The 3 months correlation between Ethan and Applied is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ethan Allen Interiors and Applied UV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied UV 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 Applied UV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied UV has no effect on the direction of Ethan Allen i.e., Ethan Allen and Applied UV go up and down completely randomly.

Pair Corralation between Ethan Allen and Applied UV

Considering the 90-day investment horizon Ethan Allen Interiors is expected to generate 0.22 times more return on investment than Applied UV. However, Ethan Allen Interiors is 4.48 times less risky than Applied UV. It trades about 0.03 of its potential returns per unit of risk. Applied UV is currently generating about -0.16 per unit of risk. If you would invest  2,770  in Ethan Allen Interiors on January 24, 2024 and sell it today you would earn a total of  431.00  from holding Ethan Allen Interiors or generate 15.56% return on investment over 90 days.

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

Ethan Allen Interiors  vs.  Applied UV

Ethan Allen Interiors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ethan Allen Interiors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ethan Allen may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Applied UV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied UV 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 basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ethan Allen and Applied UV

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

The idea behind Ethan Allen Interiors and Applied UV 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.