Correlation Between Broadstone Net and Bassett Furniture

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

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

Diversification Opportunities for Broadstone Net and Bassett Furniture

-0.12

Correlation Coefficient

Broadstone Net  Bassett Furniture

Good diversification

The 3 months correlation between Broadstone and Bassett is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Broadstone Net 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 Broadstone Net 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 Broadstone Net 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 Broadstone Net i.e., Broadstone Net and Bassett Furniture go up and down completely randomly.

Pair Corralation between Broadstone Net and Bassett Furniture

Considering the 90-day investment horizon Broadstone Net Lease is expected to generate 0.51 times more return on investment than Bassett Furniture. However, Broadstone Net Lease is 1.98 times less risky than Bassett Furniture. It trades about -0.38 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  1,751  in Broadstone Net Lease on September 29, 2024 and sell it today you would lose (135.00) from holding Broadstone Net Lease or give up 7.71% of portfolio value over 90 days.

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

Broadstone Net Lease  vs.  Bassett Furniture Industries

Broadstone Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadstone Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 Broadstone Net and Bassett Furniture

The main advantage of trading using opposite Broadstone Net and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadstone Net 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 Broadstone Net 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.