Correlation Between Global Ship and Bassett Furniture

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

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

Diversification Opportunities for Global Ship and Bassett Furniture

-0.31

Correlation Coefficient

Global Ship  Bassett Furniture

Very good diversification

The 3 months correlation between Global and Bassett is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Bassett Furniture go up and down completely randomly.

Pair Corralation between Global Ship and Bassett Furniture

Assuming the 90 days trading horizon Global Ship Lease is expected to generate 0.34 times more return on investment than Bassett Furniture. However, Global Ship Lease is 2.97 times less risky than Bassett Furniture. It trades about 0.06 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about -0.22 per unit of risk. If you would invest  2,582  in Global Ship Lease on September 29, 2024 and sell it today you would earn a total of  20.00  from holding Global Ship Lease or generate 0.77% return on investment over 90 days.

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

Global Ship Lease  vs.  Bassett Furniture Industries

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with Global Ship and Bassett Furniture

The main advantage of trading using opposite Global Ship and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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 Global Ship Lease 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 Global Correlations module to find global opportunities by holding instruments from different markets.