Correlation Between Summa Silver and Bassett Furniture

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

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

Diversification Opportunities for Summa Silver and Bassett Furniture

-0.38

Correlation Coefficient

Summa Silver  Bassett Furniture

Very good diversification

The 3 months correlation between Summa and Bassett is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Summa Silver Corp and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture and Summa Silver 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 Summa Silver Corp 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 Summa Silver i.e., Summa Silver and Bassett Furniture go up and down completely randomly.

Pair Corralation between Summa Silver and Bassett Furniture

Assuming the 90 days horizon Summa Silver Corp is expected to under-perform the Bassett Furniture. In addition to that, Summa Silver is 2.32 times more volatile than Bassett Furniture Industries. It trades about -0.13 of its total potential returns per unit of risk. Bassett Furniture Industries is currently generating about -0.04 per unit of volatility. If you would invest  1,470  in Bassett Furniture Industries on September 27, 2024 and sell it today you would lose (80.00) from holding Bassett Furniture Industries or give up 5.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Summa Silver Corp  vs.  Bassett Furniture Industries

Summa Silver Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summa Silver Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Summa Silver and Bassett Furniture

The main advantage of trading using opposite Summa Silver and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summa Silver 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 Summa Silver Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.