Correlation Between Bassett Furniture and Energy Focu
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and Energy Focu 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 Bassett Furniture and Energy Focu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bassett Furniture Industries and Energy Focu, you can compare the effects of market volatilities on Bassett Furniture and Energy Focu 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 Bassett Furniture with a short position of Energy Focu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and Energy Focu.
Diversification Opportunities for Bassett Furniture and Energy Focu
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bassett and Energy is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Energy Focu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Focu and Bassett Furniture 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 Bassett Furniture Industries are associated (or correlated) with Energy Focu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Focu has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Energy Focu go up and down completely randomly.
Pair Corralation between Bassett Furniture and Energy Focu
Given the investment horizon of 90 days Bassett Furniture Industries is expected to under-perform the Energy Focu. But the stock apears to be less risky and, when comparing its historical volatility, Bassett Furniture Industries is 2.89 times less risky than Energy Focu. The stock trades about -0.36 of its potential returns per unit of risk. The Energy Focu is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 157.00 in Energy Focu on January 25, 2024 and sell it today you would lose (5.51) from holding Energy Focu or give up 3.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bassett Furniture Industries vs. Energy Focu
Performance |
| Timeline |
| Bassett Furniture |
| Energy Focu |
Bassett Furniture and Energy Focu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and Energy Focu
The main advantage of trading using opposite Bassett Furniture and Energy Focu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, Energy Focu 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 Energy Focu will offset losses from the drop in Energy Focu's long position.| Bassett Furniture vs. Hooker Furniture | Bassett Furniture vs. Flexsteel Industries | Bassett Furniture vs. Haverty Furniture Companies | Bassett Furniture vs. La Z Boy Incorporated |
| Energy Focu vs. Petros Pharmaceuticals | Energy Focu vs. Pioneer Power Solutions | Energy Focu vs. Ensysce Biosciences | Energy Focu vs. ShiftPixy |
Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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