Correlation Between Thor Industries and Escalade Incorporated

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

By analyzing existing cross correlation between Thor Industries and Escalade Incorporated, you can compare the effects of market volatilities on Thor Industries and Escalade Incorporated 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 Thor Industries with a short position of Escalade Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thor Industries and Escalade Incorporated.

Diversification Opportunities for Thor Industries and Escalade Incorporated

0.48

Correlation Coefficient

Thor Industries  Escalade Incorporated

Very weak diversification

The 3 months correlation between Thor and Escalade is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Thor Industries and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and Thor Industries 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 Thor Industries are associated (or correlated) with Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of Thor Industries i.e., Thor Industries and Escalade Incorporated go up and down completely randomly.

Pair Corralation between Thor Industries and Escalade Incorporated

Considering the 90-day investment horizon Thor Industries is expected to under-perform the Escalade Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Thor Industries is 1.86 times less risky than Escalade Incorporated. The stock trades about -0.24 of its potential returns per unit of risk. The Escalade Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,336  in Escalade Incorporated on January 30, 2024 and sell it today you would earn a total of  31.00  from holding Escalade Incorporated or generate 2.32% return on investment over 90 days.

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

Thor Industries  vs.  Escalade Incorporated

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Escalade Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalade Incorporated 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 fundamental indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Thor Industries and Escalade Incorporated

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

The idea behind Thor Industries and Escalade Incorporated 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.