Correlation Between Burlington Stores and FuelCell Energy

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

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

Diversification Opportunities for Burlington Stores and FuelCell Energy

0.17

Correlation Coefficient

Burlington Stores  FuelCell Energy

Average diversification

The 3 months correlation between Burlington and FuelCell is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Burlington Stores i.e., Burlington Stores and FuelCell Energy go up and down completely randomly.

Pair Corralation between Burlington Stores and FuelCell Energy

Assuming the 90 days trading horizon Burlington Stores is expected to generate 1.73 times less return on investment than FuelCell Energy. But when comparing it to its historical volatility, Burlington Stores is 5.16 times less risky than FuelCell Energy. It trades about 0.16 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,035  in FuelCell Energy on September 30, 2024 and sell it today you would earn a total of  57.00  from holding FuelCell Energy or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Burlington Stores  vs.  FuelCell Energy

Burlington Stores

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 12 (%) 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.

FuelCell Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FuelCell Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FuelCell Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and FuelCell Energy

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

The idea behind Burlington Stores and FuelCell Energy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.