Correlation Between Transportadora and BURLINGTON STORES

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

By analyzing existing cross correlation between Transportadora de Gas and BURLINGTON STORES, you can compare the effects of market volatilities on Transportadora and BURLINGTON STORES 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 Transportadora with a short position of BURLINGTON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and BURLINGTON STORES.

Diversification Opportunities for Transportadora and BURLINGTON STORES

0.86

Correlation Coefficient

Transportadora  BURLINGTON STORES

Very poor diversification

The 3 months correlation between Transportadora and BURLINGTON is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES and Transportadora 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 Transportadora de Gas are associated (or correlated) with BURLINGTON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BURLINGTON STORES has no effect on the direction of Transportadora i.e., Transportadora and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between Transportadora and BURLINGTON STORES

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 2.08 times more return on investment than BURLINGTON STORES. However, Transportadora is 2.08 times more volatile than BURLINGTON STORES. It trades about 0.14 of its potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.1 per unit of risk. If you would invest  1,870  in Transportadora de Gas on September 14, 2024 and sell it today you would earn a total of  690.00  from holding Transportadora de Gas or generate 36.9% return on investment over 90 days.

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

Transportadora de Gas  vs.  BURLINGTON STORES

Transportadora de Gas

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

BURLINGTON STORES

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and BURLINGTON STORES

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

The idea behind Transportadora de Gas and BURLINGTON STORES 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.