Correlation Between Burlington Stores and Victorias Secret

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

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

Diversification Opportunities for Burlington Stores and Victorias Secret

0.79

Correlation Coefficient

Burlington Stores  Victorias Secret

Poor diversification

The 3 months correlation between Burlington and Victorias is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret 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 Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of Burlington Stores i.e., Burlington Stores and Victorias Secret go up and down completely randomly.

Pair Corralation between Burlington Stores and Victorias Secret

Given the investment horizon of 90 days Burlington Stores is expected to under-perform the Victorias Secret. But the stock apears to be less risky and, when comparing its historical volatility, Burlington Stores is 2.67 times less risky than Victorias Secret. The stock trades about -0.06 of its potential returns per unit of risk. The Victorias Secret Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,740  in Victorias Secret Co on September 24, 2024 and sell it today you would earn a total of  756.00  from holding Victorias Secret Co or generate 20.21% return on investment over 90 days.

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

Burlington Stores  vs.  Victorias Secret Co

Burlington Stores

Risk-Adjusted Performance

3 of 100

Insignificant

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Victorias Secret

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Victorias Secret displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and Victorias Secret

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

The idea behind Burlington Stores and Victorias Secret Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.