Correlation Between Burlington Stores and Relx PLC

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

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

Diversification Opportunities for Burlington Stores and Relx PLC

-0.05

Correlation Coefficient

Burlington Stores  Relx PLC

Good diversification

The 3 months correlation between Burlington and Relx is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of Burlington Stores i.e., Burlington Stores and Relx PLC go up and down completely randomly.

Pair Corralation between Burlington Stores and Relx PLC

Given the investment horizon of 90 days Burlington Stores is expected to generate 2.39 times more return on investment than Relx PLC. However, Burlington Stores is 2.39 times more volatile than Relx PLC ADR. It trades about 0.13 of its potential returns per unit of risk. Relx PLC ADR is currently generating about 0.11 per unit of risk. If you would invest  11,643  in Burlington Stores on September 21, 2024 and sell it today you would earn a total of  16,882  from holding Burlington Stores or generate 145.0% return on investment over 90 days.

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

Burlington Stores  vs.  Relx PLC ADR

Burlington Stores

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Burlington Stores is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Relx PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relx PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Burlington Stores and Relx PLC

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

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