Correlation Between Burlington Stores and SPDR Series

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

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

Diversification Opportunities for Burlington Stores and SPDR Series

0.64

Correlation Coefficient

Burlington Stores  SPDR Series

Poor diversification

The 3 months correlation between Burlington and SPDR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust 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 SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of Burlington Stores i.e., Burlington Stores and SPDR Series go up and down completely randomly.

Pair Corralation between Burlington Stores and SPDR Series

Assuming the 90 days trading horizon Burlington Stores is expected to generate 3.07 times more return on investment than SPDR Series. However, Burlington Stores is 3.07 times more volatile than SPDR Series Trust. It trades about 0.12 of its potential returns per unit of risk. SPDR Series Trust is currently generating about 0.11 per unit of risk. If you would invest  425,300  in Burlington Stores on September 14, 2024 and sell it today you would earn a total of  168,900  from holding Burlington Stores or generate 39.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Burlington Stores  vs.  SPDR Series Trust

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 fairly weak basic indicators, Burlington Stores showed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Series Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Series showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and SPDR Series

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

The idea behind Burlington Stores and SPDR Series Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.