Correlation Between Marine Products and Bassett Furniture

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

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

Diversification Opportunities for Marine Products and Bassett Furniture

0.69

Correlation Coefficient

Marine Products  Bassett Furniture

Poor diversification

The 3 months correlation between Marine and Bassett is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Marine Products 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 Marine Products 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 Marine Products i.e., Marine Products and Bassett Furniture go up and down completely randomly.

Pair Corralation between Marine Products and Bassett Furniture

Considering the 90-day investment horizon Marine Products is expected to generate 4.33 times less return on investment than Bassett Furniture. But when comparing it to its historical volatility, Marine Products is 1.31 times less risky than Bassett Furniture. It trades about 0.01 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,396  in Bassett Furniture Industries on September 17, 2024 and sell it today you would earn a total of  53.00  from holding Bassett Furniture Industries or generate 3.8% return on investment over 90 days.

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

Marine Products  vs.  Bassett Furniture Industries

Marine Products

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Bassett Furniture

Risk-Adjusted Performance

3 of 100

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

Pair Trading with Marine Products and Bassett Furniture

The main advantage of trading using opposite Marine Products and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marine Products 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 Marine Products 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.