Correlation Between Burlington Stores and EAGLE MATERIALS

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

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

Diversification Opportunities for Burlington Stores and EAGLE MATERIALS

0.33

Correlation Coefficient

Burlington Stores  EAGLE MATERIALS

Weak diversification

The 3 months correlation between Burlington and EAGLE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Burlington Stores i.e., Burlington Stores and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Burlington Stores and EAGLE MATERIALS

Assuming the 90 days trading horizon Burlington Stores is expected to generate 0.96 times more return on investment than EAGLE MATERIALS. However, Burlington Stores is 1.05 times less risky than EAGLE MATERIALS. It trades about -0.18 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.27 per unit of risk. If you would invest  27,200  in Burlington Stores on November 29, 2024 and sell it today you would lose (4,800) from holding Burlington Stores or give up 17.65% of portfolio value over 90 days.

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

Burlington Stores  vs.  EAGLE MATERIALS

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 basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

EAGLE MATERIALS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Burlington Stores and EAGLE MATERIALS

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

The idea behind Burlington Stores and EAGLE MATERIALS 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.