Correlation Between Bassett Furniture and EON Resources

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

Diversification Opportunities for Bassett Furniture and EON Resources

-0.54

Correlation Coefficient

Bassett Furniture  EON Resources

Excellent diversification

The 3 months correlation between Bassett and EON is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and EON Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON Resources 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 EON Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON Resources has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and EON Resources go up and down completely randomly.

Pair Corralation between Bassett Furniture and EON Resources

Given the investment horizon of 90 days Bassett Furniture Industries is expected to generate 0.37 times more return on investment than EON Resources. However, Bassett Furniture Industries is 2.72 times less risky than EON Resources. It trades about -0.03 of its potential returns per unit of risk. EON Resources is currently generating about -0.28 per unit of risk. If you would invest  1,479  in Bassett Furniture Industries on September 17, 2024 and sell it today you would lose (30.00) from holding Bassett Furniture Industries or give up 2.03% of portfolio value over 90 days.

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

Bassett Furniture Industries  vs.  EON Resources

Bassett Furniture

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bassett Furniture Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Bassett Furniture is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

EON Resources

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively inconsistent basic indicators, EON Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bassett Furniture and EON Resources

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

The idea behind Bassett Furniture Industries and EON Resources 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.