Correlation Between Burlington Stores and CAL MAINE

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

By analyzing existing cross correlation between Burlington Stores and CAL MAINE FOODS, you can compare the effects of market volatilities on Burlington Stores and CAL MAINE 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 CAL MAINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and CAL MAINE.

Diversification Opportunities for Burlington Stores and CAL MAINE

0.75

Correlation Coefficient

Burlington Stores  CAL MAINE

Poor diversification

The 3 months correlation between Burlington and CAL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and CAL MAINE FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAL MAINE FOODS 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 CAL MAINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAL MAINE FOODS has no effect on the direction of Burlington Stores i.e., Burlington Stores and CAL MAINE go up and down completely randomly.

Pair Corralation between Burlington Stores and CAL MAINE

Assuming the 90 days trading horizon Burlington Stores is expected to generate 1.39 times less return on investment than CAL MAINE. But when comparing it to its historical volatility, Burlington Stores is 1.09 times less risky than CAL MAINE. It trades about 0.19 of its potential returns per unit of risk. CAL MAINE FOODS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,088  in CAL MAINE FOODS on September 23, 2024 and sell it today you would earn a total of  888.00  from holding CAL MAINE FOODS or generate 9.77% 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.  CAL MAINE FOODS

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 comparatively unsteady basic indicators, Burlington Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

CAL MAINE FOODS

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and CAL MAINE

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

The idea behind Burlington Stores and CAL MAINE FOODS 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.