Correlation Between Burlington Stores and Fast Retailing

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

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

Diversification Opportunities for Burlington Stores and Fast Retailing

0.14

Correlation Coefficient

Burlington Stores  Fast Retailing

Average diversification

The 3 months correlation between Burlington and Fast is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Burlington Stores i.e., Burlington Stores and Fast Retailing go up and down completely randomly.

Pair Corralation between Burlington Stores and Fast Retailing

Given the investment horizon of 90 days Burlington Stores is expected to generate 1.59 times less return on investment than Fast Retailing. In addition to that, Burlington Stores is 1.35 times more volatile than Fast Retailing Co. It trades about 0.03 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.07 per unit of volatility. If you would invest  1,964  in Fast Retailing Co on September 26, 2024 and sell it today you would earn a total of  1,406  from holding Fast Retailing Co or generate 71.59% return on investment over 90 days.

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

Burlington Stores  vs.  Fast Retailing Co

Burlington Stores

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Burlington Stores is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Fast Retailing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Burlington Stores and Fast Retailing

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

The idea behind Burlington Stores and Fast Retailing Co 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.