Correlation Between KAR Auction and Bassett Furniture
Can any of the company-specific risk be diversified away by investing in both KAR Auction and Bassett Furniture 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 KAR Auction and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAR Auction Services and Bassett Furniture Industries, you can compare the effects of market volatilities on KAR Auction and Bassett Furniture 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 KAR Auction with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and Bassett Furniture.
Diversification Opportunities for KAR Auction and Bassett Furniture
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KAR and Bassett is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and KAR Auction 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 KAR Auction Services are associated (or correlated) with Bassett Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bassett Furniture has no effect on the direction of KAR Auction i.e., KAR Auction and Bassett Furniture go up and down completely randomly.
Pair Corralation between KAR Auction and Bassett Furniture
Considering the 90-day investment horizon KAR Auction Services is expected to generate 1.78 times more return on investment than Bassett Furniture. However, KAR Auction is 1.78 times more volatile than Bassett Furniture Industries. It trades about 0.33 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.22 per unit of risk. If you would invest 1,612 in KAR Auction Services on August 26, 2024 and sell it today you would earn a total of 382.00 from holding KAR Auction Services or generate 23.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. Bassett Furniture Industries
Performance |
| Timeline |
| KAR Auction Services |
| Bassett Furniture |
KAR Auction and Bassett Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and Bassett Furniture
The main advantage of trading using opposite KAR Auction and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction position performs unexpectedly, Bassett Furniture 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 Bassett Furniture will offset losses from the drop in Bassett Furniture's long position.| KAR Auction vs. Bassett Furniture Industries | KAR Auction vs. Hooker Furniture | KAR Auction vs. Natuzzi SpA | KAR Auction vs. Flexsteel Industries |
| Bassett Furniture vs. Willis Lease Finance | Bassett Furniture vs. Rocky Brands | Bassett Furniture vs. First Business Financial |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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