Correlation Between Bassett Furniture and United Fire
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and United Fire 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 United Fire 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 United Fire Group, you can compare the effects of market volatilities on Bassett Furniture and United Fire 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 United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and United Fire.
Diversification Opportunities for Bassett Furniture and United Fire
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bassett and United is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire Group 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 United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and United Fire go up and down completely randomly.
Pair Corralation between Bassett Furniture and United Fire
Given the investment horizon of 90 days Bassett Furniture Industries is expected to generate 0.71 times more return on investment than United Fire. However, Bassett Furniture Industries is 1.42 times less risky than United Fire. It trades about 0.01 of its potential returns per unit of risk. United Fire Group is currently generating about -0.21 per unit of risk. If you would invest 1,385 in Bassett Furniture Industries on October 23, 2024 and sell it today you would earn a total of 1.00 from holding Bassett Furniture Industries or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bassett Furniture Industries vs. United Fire Group
Performance |
| Timeline |
| Bassett Furniture |
| United Fire Group |
Bassett Furniture and United Fire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and United Fire
The main advantage of trading using opposite Bassett Furniture and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, United Fire 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 United Fire will offset losses from the drop in United Fire'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 |
| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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