Correlation Between Burlington Stores and Bank of America

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

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

Diversification Opportunities for Burlington Stores and Bank of America

0.72

Correlation Coefficient

Burlington Stores  Bank of America

Poor diversification

The 3 months correlation between Burlington and Bank is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Burlington Stores i.e., Burlington Stores and Bank of America go up and down completely randomly.

Pair Corralation between Burlington Stores and Bank of America

Assuming the 90 days trading horizon Burlington Stores is expected to under-perform the Bank of America. In addition to that, Burlington Stores is 1.48 times more volatile than Bank of America. It trades about -0.1 of its total potential returns per unit of risk. Bank of America is currently generating about -0.07 per unit of volatility. If you would invest  4,178  in Bank of America on December 30, 2024 and sell it today you would lose (375.00) from holding Bank of America or give up 8.98% of portfolio value over 90 days.

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

Burlington Stores  vs.  Bank of America

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 uncertain 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.

Bank of America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Burlington Stores and Bank of America

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

The idea behind Burlington Stores and Bank of America 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.