Correlation Between Bassett Furniture and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Bassett Furniture and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and Ross Stores.
Diversification Opportunities for Bassett Furniture and Ross Stores
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bassett and Ross is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Ross Stores go up and down completely randomly.
Pair Corralation between Bassett Furniture and Ross Stores
Given the investment horizon of 90 days Bassett Furniture is expected to generate 6.86 times less return on investment than Ross Stores. In addition to that, Bassett Furniture is 1.48 times more volatile than Ross Stores. It trades about 0.01 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.06 per unit of volatility. If you would invest 11,152 in Ross Stores on September 5, 2024 and sell it today you would earn a total of 4,220 from holding Ross Stores or generate 37.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bassett Furniture Industries vs. Ross Stores
Performance |
| Timeline |
| Bassett Furniture |
| Ross Stores |
Bassett Furniture and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and Ross Stores
The main advantage of trading using opposite Bassett Furniture and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Bassett Furniture vs. Flexsteel Industries | Bassett Furniture vs. Crown Crafts | Bassett Furniture vs. MasterBrand | Bassett Furniture vs. MillerKnoll |
| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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