Correlation Between Burlington Stores and 539830BY4

Can any of the company-specific risk be diversified away by investing in both Burlington Stores and 539830BY4 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 539830BY4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Burlington Stores and LMT 59 15 NOV 63, you can compare the effects of market volatilities on Burlington Stores and 539830BY4 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 539830BY4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and 539830BY4.

Diversification Opportunities for Burlington Stores and 539830BY4

0.26

Correlation Coefficient

Burlington Stores  539830BY4

Modest diversification

The 3 months correlation between Burlington and 539830BY4 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and LMT 59 15 NOV 63 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LMT 59 15 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 539830BY4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LMT 59 15 has no effect on the direction of Burlington Stores i.e., Burlington Stores and 539830BY4 go up and down completely randomly.

Pair Corralation between Burlington Stores and 539830BY4

Given the investment horizon of 90 days Burlington Stores is expected to generate 1.44 times more return on investment than 539830BY4. However, Burlington Stores is 1.44 times more volatile than LMT 59 15 NOV 63. It trades about 0.06 of its potential returns per unit of risk. LMT 59 15 NOV 63 is currently generating about -0.03 per unit of risk. If you would invest  27,208  in Burlington Stores on September 15, 2024 and sell it today you would earn a total of  1,789  from holding Burlington Stores or generate 6.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

Burlington Stores  vs.  LMT 59 15 NOV 63

Burlington Stores

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 5 (%) 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 January 2025.

LMT 59 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LMT 59 15 NOV 63 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 539830BY4 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Burlington Stores and 539830BY4

The main advantage of trading using opposite Burlington Stores and 539830BY4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, 539830BY4 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 539830BY4 will offset losses from the drop in 539830BY4's long position.

The idea behind Burlington Stores and LMT 59 15 NOV 63 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.