Correlation Between Burlington Stores and CarsalesCom

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

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

Diversification Opportunities for Burlington Stores and CarsalesCom

0.73

Correlation Coefficient

Burlington Stores  CarsalesCom

Poor diversification

The 3 months correlation between Burlington and CarsalesCom is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Burlington Stores i.e., Burlington Stores and CarsalesCom go up and down completely randomly.

Pair Corralation between Burlington Stores and CarsalesCom

Assuming the 90 days trading horizon Burlington Stores is expected to generate 1.88 times more return on investment than CarsalesCom. However, Burlington Stores is 1.88 times more volatile than CarsalesCom. It trades about 0.28 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.48 per unit of risk. If you would invest  23,600  in Burlington Stores on September 1, 2024 and sell it today you would earn a total of  3,600  from holding Burlington Stores or generate 15.25% 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.  CarsalesCom

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 uncertain basic indicators, Burlington Stores may actually be approaching a critical reversion point that can send shares even higher in December 2024.

CarsalesCom

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CarsalesCom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and CarsalesCom

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

The idea behind Burlington Stores and CarsalesCom 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 Commodity Directory module to find actively traded commodities issued by global exchanges.