Correlation Between Air Lease and Bassett Furniture

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

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

Diversification Opportunities for Air Lease and Bassett Furniture

0.5

Correlation Coefficient

Air Lease  Bassett Furniture

Very weak diversification

The 3 months correlation between Air and Bassett is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Air Lease 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 Air Lease are associated (or correlated) with Bassett Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bassett Furniture has no effect on the direction of Air Lease i.e., Air Lease and Bassett Furniture go up and down completely randomly.

Pair Corralation between Air Lease and Bassett Furniture

Allowing for the 90-day total investment horizon Air Lease is expected to generate 0.66 times more return on investment than Bassett Furniture. However, Air Lease is 1.51 times less risky than Bassett Furniture. It trades about -0.07 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about -0.22 per unit of risk. If you would invest  5,068  in Air Lease on September 29, 2024 and sell it today you would lose (110.00) from holding Air Lease or give up 2.17% of portfolio value over 90 days.

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

Air Lease  vs.  Bassett Furniture Industries

Air Lease

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Air Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bassett Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bassett Furniture Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Bassett 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 Air Lease and Bassett Furniture

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

The idea behind Air Lease and Bassett Furniture Industries 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..