Correlation Between Bassett Furniture and Sable Offshore

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

Diversification Opportunities for Bassett Furniture and Sable Offshore

0.35

Correlation Coefficient

Bassett Furniture  Sable Offshore

Weak diversification

The 3 months correlation between Bassett and Sable is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bassett Furniture Industries and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore Corp 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 Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of Bassett Furniture i.e., Bassett Furniture and Sable Offshore go up and down completely randomly.

Pair Corralation between Bassett Furniture and Sable Offshore

Given the investment horizon of 90 days Bassett Furniture Industries is expected to under-perform the Sable Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Bassett Furniture Industries is 2.29 times less risky than Sable Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The Sable Offshore Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,139  in Sable Offshore Corp on September 24, 2024 and sell it today you would earn a total of  1,050  from holding Sable Offshore Corp or generate 92.19% return on investment over 90 days.

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

Bassett Furniture Industries  vs.  Sable Offshore Corp

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 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.

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sable Offshore is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bassett Furniture and Sable Offshore

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

The idea behind Bassett Furniture Industries and Sable Offshore Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..