Correlation Between Burlington Stores and Capri Holdings

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

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

Diversification Opportunities for Burlington Stores and Capri Holdings

0.28

Correlation Coefficient

Burlington Stores  Capri Holdings

Modest diversification

The 3 months correlation between Burlington and Capri is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Burlington Stores i.e., Burlington Stores and Capri Holdings go up and down completely randomly.

Pair Corralation between Burlington Stores and Capri Holdings

Given the investment horizon of 90 days Burlington Stores is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Burlington Stores is 1.77 times less risky than Capri Holdings. The stock trades about -0.14 of its potential returns per unit of risk. The Capri Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,338  in Capri Holdings on December 1, 2024 and sell it today you would lose (140.00) from holding Capri Holdings or give up 5.99% of portfolio value over 90 days.

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

Burlington Stores  vs.  Capri Holdings

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.

Capri Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Capri Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Burlington Stores and Capri Holdings

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

The idea behind Burlington Stores and Capri Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.