Correlation Between Boston Beer and Bassett Furniture
Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Bassett Furniture Industries, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Bassett Furniture.
Diversification Opportunities for Boston Beer and Bassett Furniture
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and Bassett is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Bassett Furniture go up and down completely randomly.
Pair Corralation between Boston Beer and Bassett Furniture
Considering the 90-day investment horizon Boston Beer is expected to generate 1.21 times less return on investment than Bassett Furniture. In addition to that, Boston Beer is 1.2 times more volatile than Bassett Furniture Industries. It trades about 0.0 of its total potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.0 per unit of volatility. If you would invest 1,659 in Bassett Furniture Industries on September 2, 2024 and sell it today you would lose (136.00) from holding Bassett Furniture Industries or give up 8.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Bassett Furniture Industries
Performance |
| Timeline |
| Boston Beer |
| Bassett Furniture |
Boston Beer and Bassett Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Bassett Furniture
The main advantage of trading using opposite Boston Beer and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.| Boston Beer vs. Compania Cervecerias Unidas | Boston Beer vs. Molson Coors Brewing | Boston Beer vs. Suntory Beverage Food | Boston Beer vs. Carlsberg AS |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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