Correlation Between BLUESCOPE STEEL and Burlington Stores

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

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

Diversification Opportunities for BLUESCOPE STEEL and Burlington Stores

-0.32

Correlation Coefficient

BLUESCOPE STEEL  Burlington Stores

Very good diversification

The 3 months correlation between BLUESCOPE and Burlington is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and BLUESCOPE STEEL 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 BLUESCOPE STEEL 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 BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Burlington Stores go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and Burlington Stores

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to under-perform the Burlington Stores. In addition to that, BLUESCOPE STEEL is 1.23 times more volatile than Burlington Stores. It trades about -0.11 of its total potential returns per unit of risk. Burlington Stores is currently generating about 0.15 per unit of volatility. If you would invest  23,600  in Burlington Stores on October 4, 2024 and sell it today you would earn a total of  4,200  from holding Burlington Stores or generate 17.8% return on investment over 90 days.

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

BLUESCOPE STEEL  vs.  Burlington Stores

BLUESCOPE STEEL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLUESCOPE STEEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Burlington Stores

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Burlington Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BLUESCOPE STEEL and Burlington Stores

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

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.