Correlation Between Burlington Stores and Dollarama

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

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

Diversification Opportunities for Burlington Stores and Dollarama

0.16

Correlation Coefficient

Burlington Stores  Dollarama

Average diversification

The 3 months correlation between Burlington and Dollarama is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama and Burlington 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 Burlington Stores are associated (or correlated) with Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Burlington Stores i.e., Burlington Stores and Dollarama go up and down completely randomly.

Pair Corralation between Burlington Stores and Dollarama

Assuming the 90 days horizon Burlington Stores is expected to generate 1.63 times more return on investment than Dollarama. However, Burlington Stores is 1.63 times more volatile than Dollarama. It trades about 0.12 of its potential returns per unit of risk. Dollarama is currently generating about 0.02 per unit of risk. If you would invest  23,600  in Burlington Stores on September 28, 2024 and sell it today you would earn a total of  3,800  from holding Burlington Stores or generate 16.1% return on investment over 90 days.

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

Burlington Stores  vs.  Dollarama

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. Despite nearly uncertain basic indicators, Burlington Stores reported solid returns over the last few months and may actually be approaching a breakup point.

Dollarama

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dollarama is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Burlington Stores and Dollarama

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

The idea behind Burlington Stores and Dollarama 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.