Correlation Between BURLINGTON STORES and SBA Communications

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

By analyzing existing cross correlation between BURLINGTON STORES and SBA Communications Corp, you can compare the effects of market volatilities on BURLINGTON STORES and SBA Communications 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 SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BURLINGTON STORES and SBA Communications.

Diversification Opportunities for BURLINGTON STORES and SBA Communications

-0.6

Correlation Coefficient

BURLINGTON STORES  SBA Communications

Excellent diversification

The 3 months correlation between BURLINGTON and SBA is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp 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 SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and SBA Communications go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and SBA Communications

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.13 times more return on investment than SBA Communications. However, BURLINGTON STORES is 1.13 times more volatile than SBA Communications Corp. It trades about -0.02 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.28 per unit of risk. If you would invest  27,400  in BURLINGTON STORES on October 11, 2024 and sell it today you would lose (200.00) from holding BURLINGTON STORES or give up 0.73% of portfolio value over 90 days.

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

BURLINGTON STORES  vs.  SBA Communications Corp

BURLINGTON STORES

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 14 (%) 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.

SBA Communications Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBA Communications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BURLINGTON STORES and SBA Communications

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

The idea behind BURLINGTON STORES and SBA Communications Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.