Correlation Between Burlington Stores and Canlan Ice

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

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

Diversification Opportunities for Burlington Stores and Canlan Ice

0.21

Correlation Coefficient

Burlington Stores  Canlan Ice

Modest diversification

The 3 months correlation between Burlington and Canlan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Burlington Stores i.e., Burlington Stores and Canlan Ice go up and down completely randomly.

Pair Corralation between Burlington Stores and Canlan Ice

Given the investment horizon of 90 days Burlington Stores is expected to generate 10.79 times more return on investment than Canlan Ice. However, Burlington Stores is 10.79 times more volatile than Canlan Ice Sports. It trades about 0.2 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.16 per unit of risk. If you would invest  25,196  in Burlington Stores on October 6, 2024 and sell it today you would earn a total of  3,720  from holding Burlington Stores or generate 14.76% return on investment over 90 days.

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

Burlington Stores  vs.  Canlan Ice Sports

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.

Canlan Ice Sports

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice 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 Canlan Ice

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

The idea behind Burlington Stores and Canlan Ice Sports 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.