Correlation Between Burlington Stores and Alimentation Couchen

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

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

Diversification Opportunities for Burlington Stores and Alimentation Couchen

0.75

Correlation Coefficient

Burlington Stores  Alimentation Couchen

Poor diversification

The 3 months correlation between Burlington and Alimentation is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Alimentation Couchen Tard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimentation Couchen Tard 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 Alimentation Couchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimentation Couchen Tard has no effect on the direction of Burlington Stores i.e., Burlington Stores and Alimentation Couchen go up and down completely randomly.

Pair Corralation between Burlington Stores and Alimentation Couchen

Given the investment horizon of 90 days Burlington Stores is expected to generate 1.16 times more return on investment than Alimentation Couchen. However, Burlington Stores is 1.16 times more volatile than Alimentation Couchen Tard. It trades about 0.16 of its potential returns per unit of risk. Alimentation Couchen Tard is currently generating about 0.01 per unit of risk. If you would invest  24,800  in Burlington Stores on October 6, 2024 and sell it today you would earn a total of  4,116  from holding Burlington Stores or generate 16.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Burlington Stores  vs.  Alimentation Couchen Tard

Burlington Stores

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Burlington Stores disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alimentation Couchen Tard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alimentation Couchen Tard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alimentation Couchen is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Burlington Stores and Alimentation Couchen

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

The idea behind Burlington Stores and Alimentation Couchen Tard 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.