Correlation Between Burnham Holdings and Alpha One

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

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

Diversification Opportunities for Burnham Holdings and Alpha One

-0.08

Correlation Coefficient

Burnham Holdings  Alpha One

Good diversification

The 3 months correlation between Burnham and Alpha is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Burnham Holdings and Alpha One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha One and Burnham Holdings 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 Burnham Holdings are associated (or correlated) with Alpha One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha One has no effect on the direction of Burnham Holdings i.e., Burnham Holdings and Alpha One go up and down completely randomly.

Pair Corralation between Burnham Holdings and Alpha One

Assuming the 90 days horizon Burnham Holdings is expected to generate 0.63 times more return on investment than Alpha One. However, Burnham Holdings is 1.59 times less risky than Alpha One. It trades about 0.06 of its potential returns per unit of risk. Alpha One is currently generating about -0.08 per unit of risk. If you would invest  1,224  in Burnham Holdings on September 27, 2024 and sell it today you would earn a total of  171.00  from holding Burnham Holdings or generate 13.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Burnham Holdings  vs.  Alpha One

Burnham Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burnham Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Burnham Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Alpha One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Burnham Holdings and Alpha One

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

The idea behind Burnham Holdings and Alpha One 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.