Correlation Between Burlington Stores and Foot Locker

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

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

Diversification Opportunities for Burlington Stores and Foot Locker

0.35

Correlation Coefficient

Burlington Stores  Foot Locker

Weak diversification

The 3 months correlation between Burlington and Foot is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Foot Locker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foot Locker 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 Foot Locker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foot Locker has no effect on the direction of Burlington Stores i.e., Burlington Stores and Foot Locker go up and down completely randomly.

Pair Corralation between Burlington Stores and Foot Locker

Given the investment horizon of 90 days Burlington Stores is expected to generate 0.69 times more return on investment than Foot Locker. However, Burlington Stores is 1.46 times less risky than Foot Locker. It trades about 0.06 of its potential returns per unit of risk. Foot Locker is currently generating about -0.07 per unit of risk. If you would invest  26,535  in Burlington Stores on September 1, 2024 and sell it today you would earn a total of  1,653  from holding Burlington Stores or generate 6.23% return on investment over 90 days.

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

Burlington Stores  vs.  Foot Locker

Burlington Stores

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Burlington Stores may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Foot Locker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Burlington Stores and Foot Locker

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

The idea behind Burlington Stores and Foot Locker 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.