Correlation Between Burlington Stores and US Bancorp

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

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

Diversification Opportunities for Burlington Stores and US Bancorp

0.55

Correlation Coefficient

Burlington Stores  US Bancorp

Very weak diversification

The 3 months correlation between Burlington and UB5 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Burlington Stores i.e., Burlington Stores and US Bancorp go up and down completely randomly.

Pair Corralation between Burlington Stores and US Bancorp

Assuming the 90 days trading horizon Burlington Stores is expected to under-perform the US Bancorp. In addition to that, Burlington Stores is 1.78 times more volatile than US Bancorp. It trades about -0.13 of its total potential returns per unit of risk. US Bancorp is currently generating about -0.12 per unit of volatility. If you would invest  4,528  in US Bancorp on December 21, 2024 and sell it today you would lose (557.00) from holding US Bancorp or give up 12.3% of portfolio value over 90 days.

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

Burlington Stores  vs.  US Bancorp

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.

US Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Burlington Stores and US Bancorp

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

The idea behind Burlington Stores and US Bancorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.