Correlation Between BURLINGTON STORES and Solstad Offshore

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

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

Diversification Opportunities for BURLINGTON STORES and Solstad Offshore

0.74

Correlation Coefficient

BURLINGTON STORES  Solstad Offshore

Poor diversification

The 3 months correlation between BURLINGTON and Solstad is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and Solstad Offshore go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and Solstad Offshore

Assuming the 90 days trading horizon BURLINGTON STORES is expected to under-perform the Solstad Offshore. In addition to that, BURLINGTON STORES is 1.36 times more volatile than Solstad Offshore ASA. It trades about -0.16 of its total potential returns per unit of risk. Solstad Offshore ASA is currently generating about -0.03 per unit of volatility. If you would invest  332.00  in Solstad Offshore ASA on December 24, 2024 and sell it today you would lose (14.00) from holding Solstad Offshore ASA or give up 4.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

BURLINGTON STORES  vs.  Solstad Offshore ASA

BURLINGTON STORES

Risk-Adjusted Performance

Very Weak

Over the last 90 days BURLINGTON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Solstad Offshore is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BURLINGTON STORES and Solstad Offshore

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

The idea behind BURLINGTON STORES and Solstad Offshore ASA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.