Correlation Between NETGEAR and Bassett Furniture

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Can any of the company-specific risk be diversified away by investing in both NETGEAR 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 NETGEAR and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and Bassett Furniture Industries, you can compare the effects of market volatilities on NETGEAR 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 NETGEAR with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and Bassett Furniture.

Diversification Opportunities for NETGEAR and Bassett Furniture

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between NETGEAR and Bassett is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Bassett Furniture go up and down completely randomly.

Pair Corralation between NETGEAR and Bassett Furniture

Given the investment horizon of 90 days NETGEAR is expected to generate 3.02 times more return on investment than Bassett Furniture. However, NETGEAR is 3.02 times more volatile than Bassett Furniture Industries. It trades about 0.05 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about -0.18 per unit of risk. If you would invest  2,580  in NETGEAR on October 15, 2024 and sell it today you would earn a total of  48.00  from holding NETGEAR or generate 1.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NETGEAR  vs.  Bassett Furniture Industries

 Performance 
       Timeline  
NETGEAR 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.
Bassett Furniture 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 1 (%) 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.

NETGEAR and Bassett Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NETGEAR and Bassett Furniture

The main advantage of trading using opposite NETGEAR and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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