Correlation Between Burlington Stores and Lincoln Electric

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

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

Diversification Opportunities for Burlington Stores and Lincoln Electric

0.44

Correlation Coefficient

Burlington Stores  Lincoln Electric

Very weak diversification

The 3 months correlation between Burlington and Lincoln is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric 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 Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Burlington Stores i.e., Burlington Stores and Lincoln Electric go up and down completely randomly.

Pair Corralation between Burlington Stores and Lincoln Electric

Given the investment horizon of 90 days Burlington Stores is expected to generate 1.25 times more return on investment than Lincoln Electric. However, Burlington Stores is 1.25 times more volatile than Lincoln Electric Holdings. It trades about 0.12 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about -0.29 per unit of risk. If you would invest  27,286  in Burlington Stores on September 22, 2024 and sell it today you would earn a total of  1,239  from holding Burlington Stores or generate 4.54% return on investment over 90 days.

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

Burlington Stores  vs.  Lincoln Electric Holdings

Burlington Stores

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 3 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Lincoln Electric Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Lincoln Electric is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Burlington Stores and Lincoln Electric

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

The idea behind Burlington Stores and Lincoln Electric 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.