Correlation Between Burlington Stores and Westinghouse Air

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

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

Diversification Opportunities for Burlington Stores and Westinghouse Air

0.61

Correlation Coefficient

Burlington Stores  Westinghouse Air

Poor diversification

The 3 months correlation between Burlington and Westinghouse is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of Burlington Stores i.e., Burlington Stores and Westinghouse Air go up and down completely randomly.

Pair Corralation between Burlington Stores and Westinghouse Air

Given the investment horizon of 90 days Burlington Stores is expected to generate 1.13 times more return on investment than Westinghouse Air. However, Burlington Stores is 1.13 times more volatile than Westinghouse Air Brake. It trades about -0.04 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about -0.08 per unit of risk. If you would invest  29,166  in Burlington Stores on September 25, 2024 and sell it today you would lose (426.00) from holding Burlington Stores or give up 1.46% of portfolio value over 90 days.

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

Burlington Stores  vs.  Westinghouse Air Brake

Burlington Stores

Risk-Adjusted Performance

3 of 100

Weak

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.

Westinghouse Air Brake

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Burlington Stores and Westinghouse Air

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

The idea behind Burlington Stores and Westinghouse Air Brake 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.