Correlation Between Bassett Furniture and NETGEAR

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

Diversification Opportunities for Bassett Furniture and NETGEAR

0.31

Correlation Coefficient

Bassett Furniture  NETGEAR

Weak diversification

The 3 months correlation between Bassett and NETGEAR is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and NETGEAR go up and down completely randomly.

Pair Corralation between Bassett Furniture and NETGEAR

Given the investment horizon of 90 days Bassett Furniture is expected to generate 12.1 times less return on investment than NETGEAR. But when comparing it to its historical volatility, Bassett Furniture Industries is 1.17 times less risky than NETGEAR. It trades about 0.03 of its potential returns per unit of risk. NETGEAR is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  2,042  in NETGEAR on September 26, 2024 and sell it today you would earn a total of  797.00  from holding NETGEAR or generate 39.03% return on investment over 90 days.

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

Bassett Furniture Industries  vs.  NETGEAR

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

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bassett Furniture and NETGEAR

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

The idea behind Bassett Furniture Industries and NETGEAR 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.