Correlation Between Lincoln Educational and Bassett Furniture

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

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

Diversification Opportunities for Lincoln Educational and Bassett Furniture

0.21

Correlation Coefficient

Lincoln Educational  Bassett Furniture

Modest diversification

The 3 months correlation between Lincoln and Bassett is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Lincoln Educational 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 Lincoln Educational Services 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 Lincoln Educational i.e., Lincoln Educational and Bassett Furniture go up and down completely randomly.

Pair Corralation between Lincoln Educational and Bassett Furniture

Given the investment horizon of 90 days Lincoln Educational is expected to generate 3.32 times less return on investment than Bassett Furniture. In addition to that, Lincoln Educational is 1.69 times more volatile than Bassett Furniture Industries. It trades about 0.02 of its total potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.12 per unit of volatility. If you would invest  1,366  in Bassett Furniture Industries on December 29, 2024 and sell it today you would earn a total of  209.00  from holding Bassett Furniture Industries or generate 15.3% return on investment over 90 days.

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

Lincoln Educational Services  vs.  Bassett Furniture Industries

Lincoln Educational

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln Educational is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Lincoln Educational and Bassett Furniture

The main advantage of trading using opposite Lincoln Educational and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Educational 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 Lincoln Educational Services 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.