Correlation Between Bassett Furniture and Nexstar Broadcasting

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

Diversification Opportunities for Bassett Furniture and Nexstar Broadcasting

0.71

Correlation Coefficient

Bassett Furniture  Nexstar Broadcasting

Poor diversification

The 3 months correlation between Bassett and Nexstar is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between Bassett Furniture and Nexstar Broadcasting

Given the investment horizon of 90 days Bassett Furniture is expected to generate 1.02 times less return on investment than Nexstar Broadcasting. But when comparing it to its historical volatility, Bassett Furniture Industries is 1.04 times less risky than Nexstar Broadcasting. It trades about 0.12 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,519  in Nexstar Broadcasting Group on December 29, 2024 and sell it today you would earn a total of  2,430  from holding Nexstar Broadcasting Group or generate 15.66% return on investment over 90 days.

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

Bassett Furniture Industries  vs.  Nexstar Broadcasting Group

Bassett Furniture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Bassett Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nexstar Broadcasting

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nexstar Broadcasting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bassett Furniture and Nexstar Broadcasting

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

The idea behind Bassett Furniture Industries and Nexstar Broadcasting Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.