Correlation Between FAST RETAIL and BURLINGTON STORES

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Can any of the company-specific risk be diversified away by investing in both FAST RETAIL 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 FAST RETAIL and BURLINGTON STORES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAST RETAIL ADR and BURLINGTON STORES, you can compare the effects of market volatilities on FAST RETAIL 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 FAST RETAIL with a short position of BURLINGTON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and BURLINGTON STORES.

Diversification Opportunities for FAST RETAIL and BURLINGTON STORES

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between FAST and BURLINGTON is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES and FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between FAST RETAIL and BURLINGTON STORES

Assuming the 90 days trading horizon FAST RETAIL is expected to generate 1.21 times less return on investment than BURLINGTON STORES. But when comparing it to its historical volatility, FAST RETAIL ADR is 1.39 times less risky than BURLINGTON STORES. It trades about 0.35 of its potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  24,400  in BURLINGTON STORES on September 10, 2024 and sell it today you would earn a total of  3,200  from holding BURLINGTON STORES or generate 13.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

FAST RETAIL ADR  vs.  BURLINGTON STORES

 Performance 
       Timeline  
FAST RETAIL ADR 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL reported solid returns over the last few months and may actually be approaching a breakup point.
BURLINGTON STORES 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

FAST RETAIL and BURLINGTON STORES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FAST RETAIL and BURLINGTON STORES

The main advantage of trading using opposite FAST RETAIL and BURLINGTON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL 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's long position.
The idea behind FAST RETAIL ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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