Correlation Between Westinghouse Air and Bassett Furniture
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air 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 Westinghouse Air and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westinghouse Air Brake and Bassett Furniture Industries, you can compare the effects of market volatilities on Westinghouse Air 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 Westinghouse Air with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Bassett Furniture.
Diversification Opportunities for Westinghouse Air and Bassett Furniture
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westinghouse and Bassett is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Westinghouse Air 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 Westinghouse Air Brake 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 Westinghouse Air i.e., Westinghouse Air and Bassett Furniture go up and down completely randomly.
Pair Corralation between Westinghouse Air and Bassett Furniture
Considering the 90-day investment horizon Westinghouse Air is expected to generate 1.08 times less return on investment than Bassett Furniture. But when comparing it to its historical volatility, Westinghouse Air Brake is 1.39 times less risky than Bassett Furniture. It trades about 0.26 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,420 in Bassett Furniture Industries on September 1, 2024 and sell it today you would earn a total of 103.00 from holding Bassett Furniture Industries or generate 7.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Bassett Furniture Industries
Performance |
| Timeline |
| Westinghouse Air Brake |
| Bassett Furniture |
Westinghouse Air and Bassett Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Bassett Furniture
The main advantage of trading using opposite Westinghouse Air and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air 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.| Westinghouse Air vs. Greenbrier Companies | Westinghouse Air vs. LB Foster | Westinghouse Air vs. CSX Corporation | Westinghouse Air vs. Norfolk Southern |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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