Correlation Between Burford Capital and Carlyle

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

By analyzing existing cross correlation between Burford Capital and Carlyle Group, you can compare the effects of market volatilities on Burford Capital and Carlyle 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 Burford Capital with a short position of Carlyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burford Capital and Carlyle.

Diversification Opportunities for Burford Capital and Carlyle

0.09

Correlation Coefficient

Burford Capital  Carlyle

Significant diversification

The 3 months correlation between Burford and Carlyle is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Burford Capital and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Burford Capital 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 Burford Capital are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Burford Capital i.e., Burford Capital and Carlyle go up and down completely randomly.

Pair Corralation between Burford Capital and Carlyle

Considering the 90-day investment horizon Burford Capital is expected to generate 0.85 times more return on investment than Carlyle. However, Burford Capital is 1.18 times less risky than Carlyle. It trades about 0.06 of its potential returns per unit of risk. Carlyle Group is currently generating about -0.06 per unit of risk. If you would invest  1,290  in Burford Capital on December 25, 2024 and sell it today you would earn a total of  93.00  from holding Burford Capital or generate 7.21% return on investment over 90 days.

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

Burford Capital  vs.  Carlyle Group

Burford Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Burford Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Burford Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Carlyle Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Burford Capital and Carlyle

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

The idea behind Burford Capital and Carlyle Group 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..