Correlation Between Bassett Furniture and J Long

Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and J Long 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 J Long 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 J Long Group Limited, you can compare the effects of market volatilities on Bassett Furniture and J Long 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 J Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and J Long.

Diversification Opportunities for Bassett Furniture and J Long

-0.29

Correlation Coefficient

Bassett Furniture  J Long

Very good diversification

The 3 months correlation between Bassett and J Long is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and J Long Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Long Group 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 J Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Long Group has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and J Long go up and down completely randomly.

Pair Corralation between Bassett Furniture and J Long

Given the investment horizon of 90 days Bassett Furniture is expected to generate 30.9 times less return on investment than J Long. But when comparing it to its historical volatility, Bassett Furniture Industries is 7.11 times less risky than J Long. It trades about 0.02 of its potential returns per unit of risk. J Long Group Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  385.00  in J Long Group Limited on October 15, 2024 and sell it today you would earn a total of  132.00  from holding J Long Group Limited or generate 34.29% return on investment over 90 days.

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

Bassett Furniture Industries  vs.  J Long Group Limited

Bassett Furniture

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

J Long Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in J Long Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, J Long disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bassett Furniture and J Long

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

The idea behind Bassett Furniture Industries and J Long Group Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.