Correlation Between BURLINGTON STORES and Mastercard

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

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

Diversification Opportunities for BURLINGTON STORES and Mastercard

0.81

Correlation Coefficient

BURLINGTON STORES  Mastercard

Very poor diversification

The 3 months correlation between BURLINGTON and Mastercard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and Mastercard go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and Mastercard

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.9 times less return on investment than Mastercard. In addition to that, BURLINGTON STORES is 1.46 times more volatile than Mastercard. It trades about 0.04 of its total potential returns per unit of risk. Mastercard is currently generating about 0.1 per unit of volatility. If you would invest  50,140  in Mastercard on October 4, 2024 and sell it today you would earn a total of  810.00  from holding Mastercard or generate 1.62% return on investment over 90 days.

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

BURLINGTON STORES  vs.  Mastercard

BURLINGTON STORES

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 11 (%) 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.

Mastercard

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BURLINGTON STORES and Mastercard

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

The idea behind BURLINGTON STORES and Mastercard 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.