Correlation Between Cal Maine and Burlington Stores

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

By analyzing existing cross correlation between Cal Maine Foods and Burlington Stores, you can compare the effects of market volatilities on Cal Maine and Burlington Stores 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 Cal Maine with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Burlington Stores.

Diversification Opportunities for Cal Maine and Burlington Stores

0.88

Correlation Coefficient

Cal Maine  Burlington Stores

Very poor diversification

The 3 months correlation between Cal and Burlington is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Cal Maine 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 Cal Maine Foods are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Cal Maine i.e., Cal Maine and Burlington Stores go up and down completely randomly.

Pair Corralation between Cal Maine and Burlington Stores

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 1.88 times more return on investment than Burlington Stores. However, Cal Maine is 1.88 times more volatile than Burlington Stores. It trades about 0.2 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.06 per unit of risk. If you would invest  9,824  in Cal Maine Foods on October 24, 2024 and sell it today you would earn a total of  1,061  from holding Cal Maine Foods or generate 10.8% return on investment over 90 days.

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

Cal Maine Foods  vs.  Burlington Stores

Cal Maine Foods

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cal Maine unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively fragile basic indicators, Burlington Stores unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cal Maine and Burlington Stores

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

The idea behind Cal Maine Foods and Burlington Stores 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..