Correlation Between Birks and Burberry Group

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

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

Diversification Opportunities for Birks and Burberry Group

-0.47

Correlation Coefficient

Birks  Burberry Group

Very good diversification

The 3 months correlation between Birks and Burberry is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and Burberry Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burberry Group plc and Birks 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 Birks Group are associated (or correlated) with Burberry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burberry Group plc has no effect on the direction of Birks i.e., Birks and Burberry Group go up and down completely randomly.

Pair Corralation between Birks and Burberry Group

Considering the 90-day investment horizon Birks Group is expected to under-perform the Burberry Group. In addition to that, Birks is 2.59 times more volatile than Burberry Group plc. It trades about -0.31 of its total potential returns per unit of risk. Burberry Group plc is currently generating about -0.14 per unit of volatility. If you would invest  1,480  in Burberry Group plc on December 1, 2024 and sell it today you would lose (88.00) from holding Burberry Group plc or give up 5.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Birks Group  vs.  Burberry Group plc

Birks Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Burberry Group plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Burberry Group plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Burberry Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Birks and Burberry Group

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

The idea behind Birks Group and Burberry Group plc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.