Correlation Between Flexsteel Industries and Bassett Furniture

Can any of the company-specific risk be diversified away by investing in both Flexsteel Industries 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 Flexsteel Industries and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flexsteel Industries and Bassett Furniture Industries, you can compare the effects of market volatilities on Flexsteel Industries 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 Flexsteel Industries with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexsteel Industries and Bassett Furniture.

Diversification Opportunities for Flexsteel Industries and Bassett Furniture

-0.69

Correlation Coefficient

Flexsteel Industries  Bassett Furniture

Excellent diversification

The 3 months correlation between Flexsteel and Bassett is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Flexsteel Industries 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 Flexsteel Industries 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 Flexsteel Industries i.e., Flexsteel Industries and Bassett Furniture go up and down completely randomly.

Pair Corralation between Flexsteel Industries and Bassett Furniture

Given the investment horizon of 90 days Flexsteel Industries is expected to under-perform the Bassett Furniture. In addition to that, Flexsteel Industries is 1.87 times more volatile than Bassett Furniture Industries. It trades about -0.16 of its total potential returns per unit of risk. Bassett Furniture Industries is currently generating about -0.1 per unit of volatility. 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

Flexsteel Industries  vs.  Bassett Furniture Industries

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.

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.

Pair Trading with Flexsteel Industries and Bassett Furniture

The main advantage of trading using opposite Flexsteel Industries and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexsteel Industries 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.

The idea behind Flexsteel Industries and Bassett Furniture 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.