Correlation Between Bassett Furniture and Universal
Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and Universal 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 Universal 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 Universal, you can compare the effects of market volatilities on Bassett Furniture and Universal 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 Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and Universal.
Diversification Opportunities for Bassett Furniture and Universal
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bassett and Universal is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Universal go up and down completely randomly.
Pair Corralation between Bassett Furniture and Universal
Given the investment horizon of 90 days Bassett Furniture Industries is expected to generate 1.36 times more return on investment than Universal. However, Bassett Furniture is 1.36 times more volatile than Universal. It trades about 0.09 of its potential returns per unit of risk. Universal is currently generating about 0.09 per unit of risk. If you would invest 1,375 in Bassett Furniture Industries on August 31, 2024 and sell it today you would earn a total of 133.00 from holding Bassett Furniture Industries or generate 9.67% 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. Universal
Performance |
| Timeline |
| Bassett Furniture |
| Universal |
Bassett Furniture and Universal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bassett Furniture and Universal
The main advantage of trading using opposite Bassett Furniture and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, Universal 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 Universal will offset losses from the drop in Universal'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 |
| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point 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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