Correlation Between BURLINGTON STORES and Auto Trader

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

Diversification Opportunities for BURLINGTON STORES and Auto Trader

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between BURLINGTON and Auto is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and BURLINGTON STORES 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 BURLINGTON STORES are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and Auto Trader go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and Auto Trader

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.39 times more return on investment than Auto Trader. However, BURLINGTON STORES is 1.39 times more volatile than Auto Trader Group. It trades about 0.1 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.01 per unit of risk. If you would invest  24,000  in BURLINGTON STORES on September 6, 2024 and sell it today you would earn a total of  3,200  from holding BURLINGTON STORES or generate 13.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

BURLINGTON STORES  vs.  Auto Trader Group

 Performance 
       Timeline  
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 unsteady forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.
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 and Auto Trader Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BURLINGTON STORES and Auto Trader

The main advantage of trading using opposite BURLINGTON STORES and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BURLINGTON STORES position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.
The idea behind BURLINGTON STORES and Auto Trader Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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