Correlation Between Auto Trader and BURLINGTON STORES

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Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and BURLINGTON STORES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and BURLINGTON STORES, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of BURLINGTON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and BURLINGTON STORES.

Diversification Opportunities for Auto Trader and BURLINGTON STORES

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Auto and BURLINGTON is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between Auto Trader and BURLINGTON STORES

Assuming the 90 days trading horizon Auto Trader is expected to generate 1.03 times less return on investment than BURLINGTON STORES. But when comparing it to its historical volatility, Auto Trader Group is 1.61 times less risky than BURLINGTON STORES. It trades about 0.07 of its potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17,900  in BURLINGTON STORES on September 6, 2024 and sell it today you would earn a total of  9,300  from holding BURLINGTON STORES or generate 51.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Auto Trader Group  vs.  BURLINGTON STORES

 Performance 
       Timeline  
Auto Trader Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Auto Trader is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
BURLINGTON STORES 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
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 fragile forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Auto Trader and BURLINGTON STORES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Auto Trader and BURLINGTON STORES

The main advantage of trading using opposite Auto Trader and BURLINGTON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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 Auto Trader Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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