Correlation Between Bassett Furniture and Sapiens International

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

Diversification Opportunities for Bassett Furniture and Sapiens International

-0.5

Correlation Coefficient

Bassett Furniture  Sapiens International

Very good diversification

The 3 months correlation between Bassett and Sapiens is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International 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 Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Sapiens International go up and down completely randomly.

Pair Corralation between Bassett Furniture and Sapiens International

Given the investment horizon of 90 days Bassett Furniture Industries is expected to generate 0.61 times more return on investment than Sapiens International. However, Bassett Furniture Industries is 1.64 times less risky than Sapiens International. It trades about 0.06 of its potential returns per unit of risk. Sapiens International is currently generating about -0.03 per unit of risk. If you would invest  1,376  in Bassett Furniture Industries on September 5, 2024 and sell it today you would earn a total of  154.00  from holding Bassett Furniture Industries or generate 11.19% return on investment over 90 days.

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

Bassett Furniture Industries  vs.  Sapiens International

Bassett Furniture

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Bassett Furniture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bassett Furniture and Sapiens International

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

The idea behind Bassett Furniture Industries and Sapiens International 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.