Correlation Between BURLINGTON STORES and EMPLOYERS HLDGS

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

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

Diversification Opportunities for BURLINGTON STORES and EMPLOYERS HLDGS

0.77

Correlation Coefficient

BURLINGTON STORES  EMPLOYERS HLDGS

Poor diversification

The 3 months correlation between BURLINGTON and EMPLOYERS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and EMPLOYERS HLDGS DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPLOYERS HLDGS DL has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and EMPLOYERS HLDGS go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and EMPLOYERS HLDGS

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 2.46 times more return on investment than EMPLOYERS HLDGS. However, BURLINGTON STORES is 2.46 times more volatile than EMPLOYERS HLDGS DL. It trades about 0.2 of its potential returns per unit of risk. EMPLOYERS HLDGS DL is currently generating about 0.0 per unit of risk. If you would invest  25,400  in BURLINGTON STORES on September 17, 2024 and sell it today you would earn a total of  2,200  from holding BURLINGTON STORES or generate 8.66% return on investment over 90 days.

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

BURLINGTON STORES  vs.  EMPLOYERS HLDGS DL

BURLINGTON STORES

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

EMPLOYERS HLDGS DL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMPLOYERS HLDGS DL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EMPLOYERS HLDGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BURLINGTON STORES and EMPLOYERS HLDGS

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

The idea behind BURLINGTON STORES and EMPLOYERS HLDGS DL 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.