Correlation Between Franklin Street and Bassett Furniture

Can any of the company-specific risk be diversified away by investing in both Franklin Street and Bassett Furniture 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 Franklin Street and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Street Properties and Bassett Furniture Industries, you can compare the effects of market volatilities on Franklin Street and Bassett Furniture 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 Franklin Street with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Street and Bassett Furniture.

Diversification Opportunities for Franklin Street and Bassett Furniture

0.52

Correlation Coefficient

Franklin Street  Bassett Furniture

Very weak diversification

The 3 months correlation between Franklin and Bassett is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Street Properties and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Franklin Street 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 Franklin Street Properties are associated (or correlated) with Bassett Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bassett Furniture has no effect on the direction of Franklin Street i.e., Franklin Street and Bassett Furniture go up and down completely randomly.

Pair Corralation between Franklin Street and Bassett Furniture

Considering the 90-day investment horizon Franklin Street is expected to generate 2.92 times less return on investment than Bassett Furniture. In addition to that, Franklin Street is 1.45 times more volatile than Bassett Furniture Industries. It trades about 0.01 of its total potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.05 per unit of volatility. If you would invest  1,516  in Bassett Furniture Industries on December 1, 2024 and sell it today you would earn a total of  64.00  from holding Bassett Furniture Industries or generate 4.22% return on investment over 90 days.

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

Franklin Street Properties  vs.  Bassett Furniture Industries

Franklin Street Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Street Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franklin Street is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Bassett Furniture

Risk-Adjusted Performance

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

Pair Trading with Franklin Street and Bassett Furniture

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

The idea behind Franklin Street Properties and Bassett Furniture Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.