Correlation Between Escalade Incorporated and Flexsteel Industries
Can any of the company-specific risk be diversified away by investing in both Escalade Incorporated and Flexsteel Industries 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 Escalade Incorporated and Flexsteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Escalade Incorporated and Flexsteel Industries, you can compare the effects of market volatilities on Escalade Incorporated and Flexsteel Industries 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 Escalade Incorporated with a short position of Flexsteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Escalade Incorporated and Flexsteel Industries.
Diversification Opportunities for Escalade Incorporated and Flexsteel Industries
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Escalade and Flexsteel is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Flexsteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexsteel Industries and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Flexsteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexsteel Industries has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Flexsteel Industries go up and down completely randomly.
Pair Corralation between Escalade Incorporated and Flexsteel Industries
Given the investment horizon of 90 days Escalade Incorporated is expected to generate 2.15 times less return on investment than Flexsteel Industries. But when comparing it to its historical volatility, Escalade Incorporated is 1.42 times less risky than Flexsteel Industries. It trades about 0.11 of its potential returns per unit of risk. Flexsteel Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,991 in Flexsteel Industries on August 31, 2024 and sell it today you would earn a total of 1,926 from holding Flexsteel Industries or generate 48.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Escalade Incorporated vs. Flexsteel Industries
Performance |
| Timeline |
| Escalade Incorporated |
| Flexsteel Industries |
Escalade Incorporated and Flexsteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Escalade Incorporated and Flexsteel Industries
The main advantage of trading using opposite Escalade Incorporated and Flexsteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Escalade Incorporated position performs unexpectedly, Flexsteel Industries 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 Flexsteel Industries will offset losses from the drop in Flexsteel Industries' long position.| Escalade Incorporated vs. Johnson Outdoors | Escalade Incorporated vs. First Business Financial | Escalade Incorporated vs. Flexsteel Industries | Escalade Incorporated vs. Superior Uniform Group |
| Flexsteel Industries vs. Hooker Furniture | Flexsteel Industries vs. Bassett Furniture Industries | Flexsteel Industries vs. Willis Lease Finance | Flexsteel Industries vs. Rocky Brands |
Check out your portfolio center.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 Stocks Directory module to find actively traded stocks across global markets.
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