Correlation Between Tempur Sealy and Bassett Furniture
Can any of the company-specific risk be diversified away by investing in both Tempur Sealy 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 Tempur Sealy and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tempur Sealy International and Bassett Furniture Industries, you can compare the effects of market volatilities on Tempur Sealy 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 Tempur Sealy with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tempur Sealy and Bassett Furniture.
Diversification Opportunities for Tempur Sealy and Bassett Furniture
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tempur and Bassett is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tempur Sealy International and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Tempur Sealy 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 Tempur Sealy International 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 Tempur Sealy i.e., Tempur Sealy and Bassett Furniture go up and down completely randomly.
Pair Corralation between Tempur Sealy and Bassett Furniture
Considering the 90-day investment horizon Tempur Sealy International is expected to generate 1.02 times more return on investment than Bassett Furniture. However, Tempur Sealy is 1.02 times more volatile than Bassett Furniture Industries. It trades about 0.06 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.02 per unit of risk. If you would invest 3,764 in Tempur Sealy International on August 31, 2024 and sell it today you would earn a total of 1,834 from holding Tempur Sealy International or generate 48.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tempur Sealy International vs. Bassett Furniture Industries
Performance |
| Timeline |
| Tempur Sealy Interna |
| Bassett Furniture |
Tempur Sealy and Bassett Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tempur Sealy and Bassett Furniture
The main advantage of trading using opposite Tempur Sealy and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tempur Sealy 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.| Tempur Sealy vs. La Z Boy Incorporated | Tempur Sealy vs. Purple Innovation | Tempur Sealy vs. MasterBrand | Tempur Sealy vs. Ethan Allen Interiors |
| Bassett Furniture vs. Hooker Furniture | Bassett Furniture vs. Flexsteel Industries | Bassett Furniture vs. Haverty Furniture Companies | Bassett Furniture vs. La Z Boy Incorporated |
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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