Correlation Between Hamilton Beach and Bassett Furniture

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

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

Diversification Opportunities for Hamilton Beach and Bassett Furniture

0.66

Correlation Coefficient

Hamilton Beach  Bassett Furniture

Poor diversification

The 3 months correlation between Hamilton and Bassett is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Beach Brands and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Hamilton Beach 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 Hamilton Beach Brands 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 Hamilton Beach i.e., Hamilton Beach and Bassett Furniture go up and down completely randomly.

Pair Corralation between Hamilton Beach and Bassett Furniture

Considering the 90-day investment horizon Hamilton Beach Brands is expected to generate 1.5 times more return on investment than Bassett Furniture. However, Hamilton Beach is 1.5 times more volatile than Bassett Furniture Industries. It trades about 0.1 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.12 per unit of risk. If you would invest  1,650  in Hamilton Beach Brands on December 30, 2024 and sell it today you would earn a total of  296.00  from holding Hamilton Beach Brands or generate 17.94% return on investment over 90 days.

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

Hamilton Beach Brands  vs.  Bassett Furniture Industries

Hamilton Beach Brands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Beach Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Hamilton Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Hamilton Beach and Bassett Furniture

The main advantage of trading using opposite Hamilton Beach and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hamilton Beach 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 Hamilton Beach Brands 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.