Correlation Between Bassett Furniture and La Z
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and La Z 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 La Z 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 La Z Boy Incorporated, you can compare the effects of market volatilities on Bassett Furniture and La Z 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 La Z. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and La Z.
Diversification Opportunities for Bassett Furniture and La Z
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bassett and LZB is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Z Boy 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 La Z. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Z Boy has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and La Z go up and down completely randomly.
Pair Corralation between Bassett Furniture and La Z
Given the investment horizon of 90 days Bassett Furniture is expected to generate 1.22 times less return on investment than La Z. But when comparing it to its historical volatility, Bassett Furniture Industries is 1.01 times less risky than La Z. It trades about 0.31 of its potential returns per unit of risk. La Z Boy Incorporated is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,981 in La Z Boy Incorporated on August 28, 2024 and sell it today you would earn a total of 596.00 from holding La Z Boy Incorporated or generate 14.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bassett Furniture Industries vs. La Z Boy Incorporated
Performance |
| Timeline |
| Bassett Furniture |
| La Z Boy |
Bassett Furniture and La Z Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and La Z
The main advantage of trading using opposite Bassett Furniture and La Z positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, La Z 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 La Z will offset losses from the drop in La Z'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 |
| La Z vs. Flexsteel Industries | La Z vs. Crown Crafts | La Z vs. Bassett Furniture Industries | La Z vs. Hamilton Beach Brands |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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