Correlation Between Buckle and Burlington Stores

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

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

Diversification Opportunities for Buckle and Burlington Stores

0.9

Correlation Coefficient

Buckle  Burlington Stores

Almost no diversification

The 3 months correlation between Buckle and Burlington is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Buckle Inc and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Buckle 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 Buckle Inc 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 Buckle i.e., Buckle and Burlington Stores go up and down completely randomly.

Pair Corralation between Buckle and Burlington Stores

Considering the 90-day investment horizon Buckle Inc is expected to generate 0.96 times more return on investment than Burlington Stores. However, Buckle Inc is 1.04 times less risky than Burlington Stores. It trades about -0.02 of its potential returns per unit of risk. Burlington Stores is currently generating about -0.1 per unit of risk. If you would invest  4,464  in Buckle Inc on November 19, 2024 and sell it today you would lose (136.00) from holding Buckle Inc or give up 3.05% of portfolio value over 90 days.

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

Buckle Inc  vs.  Burlington Stores

Buckle Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buckle Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Buckle 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

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Buckle and Burlington Stores

The main advantage of trading using opposite Buckle and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buckle 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 Buckle Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.