Correlation Between Boston Properties and Bassett Furniture

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

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

Diversification Opportunities for Boston Properties and Bassett Furniture

-0.29

Correlation Coefficient

Boston Properties  Bassett Furniture

Very good diversification

The 3 months correlation between Boston and Bassett is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Boston Properties 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 Boston Properties 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 Boston Properties i.e., Boston Properties and Bassett Furniture go up and down completely randomly.

Pair Corralation between Boston Properties and Bassett Furniture

Considering the 90-day investment horizon Boston Properties is expected to under-perform the Bassett Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Boston Properties is 1.12 times less risky than Bassett Furniture. The stock trades about -0.07 of its potential returns per unit of risk. The Bassett Furniture Industries is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,457  in Bassett Furniture Industries on September 21, 2024 and sell it today you would lose (72.00) from holding Bassett Furniture Industries or give up 4.94% of portfolio value over 90 days.

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

Boston Properties  vs.  Bassett Furniture Industries

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

Pair Trading with Boston Properties and Bassett Furniture

The main advantage of trading using opposite Boston Properties and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties 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 Boston Properties 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.