Correlation Between KAR Auction and Bassett Furniture

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

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

Diversification Opportunities for KAR Auction and Bassett Furniture

-0.27

Correlation Coefficient

KAR Auction  Bassett Furniture

Very good diversification

The 3 months correlation between KAR and Bassett is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and KAR Auction 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 KAR Auction Services 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 KAR Auction i.e., KAR Auction and Bassett Furniture go up and down completely randomly.

Pair Corralation between KAR Auction and Bassett Furniture

Considering the 90-day investment horizon KAR Auction is expected to generate 1.61 times less return on investment than Bassett Furniture. But when comparing it to its historical volatility, KAR Auction Services is 1.21 times less risky than Bassett Furniture. It trades about 0.02 of its potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,369  in Bassett Furniture Industries on July 1, 2024 and sell it today you would earn a total of  121.00  from holding Bassett Furniture Industries or generate 8.84% return on investment over 90 days.

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

KAR Auction Services  vs.  Bassett Furniture Industries

KAR Auction Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, KAR Auction is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Bassett Furniture

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Bassett Furniture may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with KAR Auction and Bassett Furniture

The main advantage of trading using opposite KAR Auction and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction 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 KAR Auction Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.