Correlation Between Bassett Furniture and RCI Hospitality
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and RCI Hospitality 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 RCI Hospitality 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 RCI Hospitality Holdings, you can compare the effects of market volatilities on Bassett Furniture and RCI Hospitality 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 RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and RCI Hospitality.
Diversification Opportunities for Bassett Furniture and RCI Hospitality
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bassett and RCI is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings 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 RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and RCI Hospitality go up and down completely randomly.
Pair Corralation between Bassett Furniture and RCI Hospitality
Given the investment horizon of 90 days Bassett Furniture is expected to generate 2.04 times less return on investment than RCI Hospitality. But when comparing it to its historical volatility, Bassett Furniture Industries is 1.64 times less risky than RCI Hospitality. It trades about 0.21 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,460 in RCI Hospitality Holdings on August 30, 2024 and sell it today you would earn a total of 744.00 from holding RCI Hospitality Holdings or generate 16.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bassett Furniture Industries vs. RCI Hospitality Holdings
Performance |
| Timeline |
| Bassett Furniture |
| RCI Hospitality Holdings |
Bassett Furniture and RCI Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and RCI Hospitality
The main advantage of trading using opposite Bassett Furniture and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, RCI Hospitality 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 RCI Hospitality will offset losses from the drop in RCI Hospitality'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 |
| RCI Hospitality vs. Brinker International | RCI Hospitality vs. Bloomin Brands | RCI Hospitality vs. BJs Restaurants | RCI Hospitality vs. Dennys Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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