Correlation Between MasterBrand and Bassett Furniture
Can any of the company-specific risk be diversified away by investing in both MasterBrand 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 MasterBrand and Bassett Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MasterBrand and Bassett Furniture Industries, you can compare the effects of market volatilities on MasterBrand 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 MasterBrand with a short position of Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of MasterBrand and Bassett Furniture.
Diversification Opportunities for MasterBrand and Bassett Furniture
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MasterBrand and Bassett is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding MasterBrand and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and MasterBrand 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 MasterBrand 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 MasterBrand i.e., MasterBrand and Bassett Furniture go up and down completely randomly.
Pair Corralation between MasterBrand and Bassett Furniture
Considering the 90-day investment horizon MasterBrand is expected to under-perform the Bassett Furniture. But the stock apears to be less risky and, when comparing its historical volatility, MasterBrand is 1.1 times less risky than Bassett Furniture. The stock trades about -0.17 of its potential returns per unit of risk. The Bassett Furniture Industries is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,434 in Bassett Furniture Industries on February 2, 2024 and sell it today you would lose (35.00) from holding Bassett Furniture Industries or give up 2.44% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
MasterBrand vs. Bassett Furniture Industries
Performance |
Timeline |
MasterBrand |
Bassett Furniture |
MasterBrand and Bassett Furniture Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MasterBrand and Bassett Furniture
The main advantage of trading using opposite MasterBrand and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasterBrand 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 MasterBrand 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.Bassett Furniture vs. Mohawk Industries | Bassett Furniture vs. The Lovesac | Bassett Furniture vs. Crown Crafts |
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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