Correlation Between BURLINGTON STORES and FAST RETAIL

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

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

Diversification Opportunities for BURLINGTON STORES and FAST RETAIL

0.3

Correlation Coefficient

BURLINGTON STORES  FAST RETAIL

Weak diversification

The 3 months correlation between BURLINGTON and FAST is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and FAST RETAIL go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and FAST RETAIL

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.18 times less return on investment than FAST RETAIL. In addition to that, BURLINGTON STORES is 1.05 times more volatile than FAST RETAIL ADR. It trades about 0.13 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.16 per unit of volatility. If you would invest  2,700  in FAST RETAIL ADR on September 10, 2024 and sell it today you would earn a total of  560.00  from holding FAST RETAIL ADR or generate 20.74% return on investment over 90 days.

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

BURLINGTON STORES  vs.  FAST RETAIL ADR

BURLINGTON STORES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 10 (%) 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.

FAST RETAIL ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BURLINGTON STORES and FAST RETAIL

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

The idea behind BURLINGTON STORES and FAST RETAIL ADR 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.