Correlation Between Heidelberg Materials and BURLINGTON STORES

Can any of the company-specific risk be diversified away by investing in both Heidelberg Materials 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 Heidelberg Materials and BURLINGTON STORES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heidelberg Materials AG and BURLINGTON STORES, you can compare the effects of market volatilities on Heidelberg Materials 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 Heidelberg Materials with a short position of BURLINGTON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and BURLINGTON STORES.

Diversification Opportunities for Heidelberg Materials and BURLINGTON STORES

0.87

Correlation Coefficient

Heidelberg Materials  BURLINGTON STORES

Very poor diversification

The 3 months correlation between Heidelberg and BURLINGTON is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES and Heidelberg Materials 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 Heidelberg Materials AG 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 Heidelberg Materials i.e., Heidelberg Materials and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between Heidelberg Materials and BURLINGTON STORES

Assuming the 90 days horizon Heidelberg Materials AG is expected to generate 0.78 times more return on investment than BURLINGTON STORES. However, Heidelberg Materials AG is 1.28 times less risky than BURLINGTON STORES. It trades about 0.07 of its potential returns per unit of risk. BURLINGTON STORES is currently generating about -0.08 per unit of risk. If you would invest  11,840  in Heidelberg Materials AG on September 27, 2024 and sell it today you would earn a total of  205.00  from holding Heidelberg Materials AG or generate 1.73% return on investment over 90 days.

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

Heidelberg Materials AG  vs.  BURLINGTON STORES

Heidelberg Materials

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

BURLINGTON STORES

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, BURLINGTON STORES may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heidelberg Materials and BURLINGTON STORES

The main advantage of trading using opposite Heidelberg Materials and BURLINGTON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heidelberg Materials 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 Heidelberg Materials AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.