Correlation Between AEON STORES and Burlington Stores

Can any of the company-specific risk be diversified away by investing in both AEON STORES and Burlington Stores 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 AEON STORES and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEON STORES and Burlington Stores, you can compare the effects of market volatilities on AEON STORES and Burlington Stores 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 AEON STORES with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEON STORES and Burlington Stores.

Diversification Opportunities for AEON STORES and Burlington Stores

-0.09

Correlation Coefficient

AEON STORES  Burlington Stores

Good diversification

The 3 months correlation between AEON and Burlington is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and AEON STORES 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 AEON STORES are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of AEON STORES i.e., AEON STORES and Burlington Stores go up and down completely randomly.

Pair Corralation between AEON STORES and Burlington Stores

Assuming the 90 days trading horizon AEON STORES is expected to under-perform the Burlington Stores. But the stock apears to be less risky and, when comparing its historical volatility, AEON STORES is 5.55 times less risky than Burlington Stores. The stock trades about -0.22 of its potential returns per unit of risk. The Burlington Stores is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  23,800  in Burlington Stores on September 3, 2024 and sell it today you would earn a total of  3,400  from holding Burlington Stores or generate 14.29% return on investment over 90 days.

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

AEON STORES  vs.  Burlington Stores

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AEON STORES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Burlington Stores

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Burlington Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AEON STORES and Burlington Stores

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

The idea behind AEON STORES and Burlington Stores 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.