Correlation Between Ethan Allen and Casper Sleep

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

Diversification Opportunities for Ethan Allen and Casper Sleep

0.0

Correlation Coefficient

Ethan Allen  Casper Sleep

Pay attention - limited upside

The 3 months correlation between Ethan and Casper is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ethan Allen Interiors and Casper Sleep in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casper Sleep 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 Casper Sleep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casper Sleep has no effect on the direction of Ethan Allen i.e., Ethan Allen and Casper Sleep go up and down completely randomly.

Pair Corralation between Ethan Allen and Casper Sleep

If you would invest (100.00) in Casper Sleep on January 20, 2024 and sell it today you would earn a total of  100.00  from holding Casper Sleep or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ethan Allen Interiors  vs.  Casper Sleep

Ethan Allen Interiors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ethan Allen Interiors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Ethan Allen may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Casper Sleep

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Casper Sleep has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Casper Sleep is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ethan Allen and Casper Sleep

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

The idea behind Ethan Allen Interiors and Casper Sleep 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 Global Correlations module to find global opportunities by holding instruments from different markets.