Correlation Between BURLINGTON STORES and American Public

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

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

Diversification Opportunities for BURLINGTON STORES and American Public

0.6

Correlation Coefficient

BURLINGTON STORES  American Public

Poor diversification

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

Pair Corralation between BURLINGTON STORES and American Public

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 2.87 times less return on investment than American Public. But when comparing it to its historical volatility, BURLINGTON STORES is 2.0 times less risky than American Public. It trades about 0.03 of its potential returns per unit of risk. American Public Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,200  in American Public Education on October 26, 2024 and sell it today you would earn a total of  860.00  from holding American Public Education or generate 71.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

BURLINGTON STORES  vs.  American Public Education

BURLINGTON STORES

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Public Education

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BURLINGTON STORES and American Public

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

The idea behind BURLINGTON STORES and American Public Education 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.