Correlation Between Bassett Furniture and Marine Products

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

Diversification Opportunities for Bassett Furniture and Marine Products

0.69

Correlation Coefficient

Bassett Furniture  Marine Products

Poor diversification

The 3 months correlation between Bassett and Marine is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Marine Products go up and down completely randomly.

Pair Corralation between Bassett Furniture and Marine Products

Given the investment horizon of 90 days Bassett Furniture Industries is expected to under-perform the Marine Products. In addition to that, Bassett Furniture is 1.43 times more volatile than Marine Products. It trades about -0.03 of its total potential returns per unit of risk. Marine Products is currently generating about -0.01 per unit of volatility. If you would invest  972.00  in Marine Products on September 17, 2024 and sell it today you would lose (7.00) from holding Marine Products or give up 0.72% of portfolio value over 90 days.

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

Bassett Furniture Industries  vs.  Marine Products

Bassett Furniture

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Marine Products

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bassett Furniture and Marine Products

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

The idea behind Bassett Furniture Industries and Marine Products 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.