Correlation Between Bassett Furniture and Black Hills

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

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

Diversification Opportunities for Bassett Furniture and Black Hills

0.54

Correlation Coefficient

Bassett Furniture  Black Hills

Very weak diversification

The 3 months correlation between Bassett and Black is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Bassett Furniture 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 Bassett Furniture Industries are associated (or correlated) with Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Black Hills go up and down completely randomly.

Pair Corralation between Bassett Furniture and Black Hills

Given the investment horizon of 90 days Bassett Furniture is expected to generate 1.69 times less return on investment than Black Hills. In addition to that, Bassett Furniture is 1.75 times more volatile than Black Hills. It trades about 0.01 of its total potential returns per unit of risk. Black Hills is currently generating about 0.02 per unit of volatility. If you would invest  6,046  in Black Hills on September 14, 2024 and sell it today you would earn a total of  52.00  from holding Black Hills or generate 0.86% return on investment over 90 days.

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

Bassett Furniture Industries  vs.  Black Hills

Bassett Furniture

Risk-Adjusted Performance

0 of 100

Insignificant

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Black Hills

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bassett Furniture and Black Hills

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

The idea behind Bassett Furniture Industries and Black Hills 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.