Correlation Between SYSTEMAIR and Burlington Stores

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

By analyzing existing cross correlation between SYSTEMAIR AB and Burlington Stores, you can compare the effects of market volatilities on SYSTEMAIR 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 SYSTEMAIR with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of SYSTEMAIR and Burlington Stores.

Diversification Opportunities for SYSTEMAIR and Burlington Stores

0.81

Correlation Coefficient

SYSTEMAIR  Burlington Stores

Very poor diversification

The 3 months correlation between SYSTEMAIR and Burlington is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and SYSTEMAIR 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 SYSTEMAIR AB 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 SYSTEMAIR i.e., SYSTEMAIR and Burlington Stores go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Burlington Stores

Assuming the 90 days trading horizon SYSTEMAIR AB is expected to under-perform the Burlington Stores. But the stock apears to be less risky and, when comparing its historical volatility, SYSTEMAIR AB is 1.86 times less risky than Burlington Stores. The stock trades about -0.62 of its potential returns per unit of risk. The Burlington Stores is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  27,200  in Burlington Stores on October 15, 2024 and sell it today you would earn a total of  1,000.00  from holding Burlington Stores or generate 3.68% return on investment over 90 days.

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

SYSTEMAIR AB  vs.  Burlington Stores

SYSTEMAIR AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SYSTEMAIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Burlington Stores

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Burlington Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SYSTEMAIR and Burlington Stores

The main advantage of trading using opposite SYSTEMAIR and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SYSTEMAIR 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' long position.

The idea behind SYSTEMAIR AB 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.