Correlation Between Bassett Furniture and Flexsteel Industries

Can any of the company-specific risk be diversified away by investing in both Bassett Furniture and Flexsteel Industries 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 Flexsteel Industries 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 Flexsteel Industries, you can compare the effects of market volatilities on Bassett Furniture and Flexsteel Industries 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 Flexsteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bassett Furniture and Flexsteel Industries.

Diversification Opportunities for Bassett Furniture and Flexsteel Industries

-0.69

Correlation Coefficient

Bassett Furniture  Flexsteel Industries

Excellent diversification

The 3 months correlation between Bassett and Flexsteel is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Flexsteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexsteel Industries 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 Flexsteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexsteel Industries has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Flexsteel Industries go up and down completely randomly.

Pair Corralation between Bassett Furniture and Flexsteel Industries

Given the investment horizon of 90 days Bassett Furniture Industries is expected to generate 0.54 times more return on investment than Flexsteel Industries. However, Bassett Furniture Industries is 1.87 times less risky than Flexsteel Industries. It trades about -0.1 of its potential returns per unit of risk. Flexsteel Industries is currently generating about -0.16 per unit of risk. If you would invest  1,475  in Bassett Furniture Industries on February 1, 2024 and sell it today you would lose (77.00) from holding Bassett Furniture Industries or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bassett Furniture Industries  vs.  Flexsteel Industries

Bassett Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bassett Furniture Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Flexsteel Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexsteel Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Flexsteel Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bassett Furniture and Flexsteel Industries

The main advantage of trading using opposite Bassett Furniture and Flexsteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bassett Furniture position performs unexpectedly, Flexsteel Industries 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 Flexsteel Industries will offset losses from the drop in Flexsteel Industries' long position.

The idea behind Bassett Furniture Industries and Flexsteel Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.