Correlation Between Utah Medical and Bassett Furniture

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

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

Diversification Opportunities for Utah Medical and Bassett Furniture

-0.69

Correlation Coefficient

Utah Medical  Bassett Furniture

Excellent diversification

The 3 months correlation between Utah and Bassett is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical 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 Utah Medical 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 Utah Medical 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 Utah Medical i.e., Utah Medical and Bassett Furniture go up and down completely randomly.

Pair Corralation between Utah Medical and Bassett Furniture

Given the investment horizon of 90 days Utah Medical Products is expected to under-perform the Bassett Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Utah Medical Products is 2.08 times less risky than Bassett Furniture. The stock trades about -0.12 of its potential returns per unit of risk. The Bassett Furniture Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,367  in Bassett Furniture Industries on December 19, 2024 and sell it today you would earn a total of  223.00  from holding Bassett Furniture Industries or generate 16.31% return on investment over 90 days.

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

Utah Medical Products  vs.  Bassett Furniture Industries

Utah Medical Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Utah Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 11 (%) 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 Utah Medical and Bassett Furniture

The main advantage of trading using opposite Utah Medical and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utah Medical 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 Utah Medical 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.