Correlation Between Burlington Stores and GMO Internet

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

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

Diversification Opportunities for Burlington Stores and GMO Internet

-0.92

Correlation Coefficient

Burlington Stores  GMO Internet

Pay attention - limited upside

The 3 months correlation between Burlington and GMO is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Burlington Stores i.e., Burlington Stores and GMO Internet go up and down completely randomly.

Pair Corralation between Burlington Stores and GMO Internet

Assuming the 90 days trading horizon Burlington Stores is expected to under-perform the GMO Internet. In addition to that, Burlington Stores is 1.4 times more volatile than GMO Internet. It trades about -0.11 of its total potential returns per unit of risk. GMO Internet is currently generating about 0.18 per unit of volatility. If you would invest  1,594  in GMO Internet on December 23, 2024 and sell it today you would earn a total of  376.00  from holding GMO Internet or generate 23.59% return on investment over 90 days.

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

Burlington Stores  vs.  GMO Internet

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GMO Internet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and GMO Internet

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

The idea behind Burlington Stores and GMO Internet 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.