Correlation Between Bassett Furniture and Flexsteel Industries
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and Flexsteel Industries 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 Flexsteel Industries 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 Flexsteel Industries, you can compare the effects of market volatilities on Bassett Furniture and Flexsteel Industries 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 Flexsteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and Flexsteel Industries.
Diversification Opportunities for Bassett Furniture and Flexsteel Industries
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bassett and Flexsteel is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Flexsteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexsteel Industries 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 Flexsteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexsteel Industries has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Flexsteel Industries go up and down completely randomly.
Pair Corralation between Bassett Furniture and Flexsteel Industries
Given the investment horizon of 90 days Bassett Furniture Industries is expected to under-perform the Flexsteel Industries. But the stock apears to be less risky and, when comparing its historical volatility, Bassett Furniture Industries is 1.76 times less risky than Flexsteel Industries. The stock trades about -0.39 of its potential returns per unit of risk. The Flexsteel Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,568 in Flexsteel Industries on January 25, 2024 and sell it today you would earn a total of 304.00 from holding Flexsteel Industries or generate 8.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Bassett Furniture Industries vs. Flexsteel Industries
Performance |
Timeline |
Bassett Furniture |
Flexsteel Industries |
Bassett Furniture and Flexsteel Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bassett Furniture and Flexsteel Industries
The main advantage of trading using opposite Bassett Furniture and Flexsteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, Flexsteel Industries 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 Flexsteel Industries will offset losses from the drop in Flexsteel Industries' long position.Bassett Furniture vs. Natuzzi SpA | Bassett Furniture vs. Hamilton Beach Brands | Bassett Furniture vs. MasterBrand |
Flexsteel Industries vs. Bassett Furniture Industries | Flexsteel Industries vs. Natuzzi SpA | Flexsteel Industries vs. Hamilton Beach Brands | Flexsteel Industries vs. MasterBrand |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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