Correlation Between Burnham Holdings and National Stock

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

By analyzing existing cross correlation between Burnham Holdings and National Stock Yards, you can compare the effects of market volatilities on Burnham Holdings and National Stock 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 National Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burnham Holdings and National Stock.

Diversification Opportunities for Burnham Holdings and National Stock

0.33

Correlation Coefficient

Burnham Holdings  National Stock

Weak diversification

The 3 months correlation between Burnham and National is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Burnham Holdings and National Stock Yards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Stock Yards 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 National Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Stock Yards has no effect on the direction of Burnham Holdings i.e., Burnham Holdings and National Stock go up and down completely randomly.

Pair Corralation between Burnham Holdings and National Stock

Assuming the 90 days horizon Burnham Holdings is expected to under-perform the National Stock. But the pink sheet apears to be less risky and, when comparing its historical volatility, Burnham Holdings is 1.39 times less risky than National Stock. The pink sheet trades about -0.11 of its potential returns per unit of risk. The National Stock Yards is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  31,250  in National Stock Yards on October 23, 2024 and sell it today you would lose (250.00) from holding National Stock Yards or give up 0.8% of portfolio value over 90 days.

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

Burnham Holdings  vs.  National Stock Yards

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 current stock price disturbance, may contribute to short-term losses for the investors.

National Stock Yards

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Stock Yards are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, National Stock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Burnham Holdings and National Stock

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

The idea behind Burnham Holdings and National Stock Yards 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.