Correlation Between Burlington Stores and Aritzia

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

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

Diversification Opportunities for Burlington Stores and Aritzia

0.13

Correlation Coefficient

Burlington Stores  Aritzia

Average diversification

The 3 months correlation between Burlington and Aritzia is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia 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 Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Burlington Stores i.e., Burlington Stores and Aritzia go up and down completely randomly.

Pair Corralation between Burlington Stores and Aritzia

Given the investment horizon of 90 days Burlington Stores is expected to under-perform the Aritzia. But the stock apears to be less risky and, when comparing its historical volatility, Burlington Stores is 1.32 times less risky than Aritzia. The stock trades about -0.09 of its potential returns per unit of risk. The Aritzia is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,730  in Aritzia on December 27, 2024 and sell it today you would lose (46.00) from holding Aritzia or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Burlington Stores  vs.  Aritzia

Burlington Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aritzia

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Burlington Stores and Aritzia

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

The idea behind Burlington Stores and Aritzia 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.