Correlation Between KEISEI EL and BURLINGTON STORES

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

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

Diversification Opportunities for KEISEI EL and BURLINGTON STORES

0.57

Correlation Coefficient

KEISEI EL  BURLINGTON STORES

Very weak diversification

The 3 months correlation between KEISEI and BURLINGTON is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding KEISEI EL RAILWAY and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES and KEISEI EL 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 KEISEI EL RAILWAY 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 KEISEI EL i.e., KEISEI EL and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between KEISEI EL and BURLINGTON STORES

Assuming the 90 days trading horizon KEISEI EL is expected to generate 1.53 times less return on investment than BURLINGTON STORES. In addition to that, KEISEI EL is 1.46 times more volatile than BURLINGTON STORES. It trades about 0.08 of its total potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.18 per unit of volatility. If you would invest  23,200  in BURLINGTON STORES on October 25, 2024 and sell it today you would earn a total of  4,600  from holding BURLINGTON STORES or generate 19.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

KEISEI EL RAILWAY  vs.  BURLINGTON STORES

KEISEI EL RAILWAY

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KEISEI EL RAILWAY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, KEISEI EL unveiled solid returns over the last few months and may actually be approaching a breakup point.

BURLINGTON STORES

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEISEI EL and BURLINGTON STORES

The main advantage of trading using opposite KEISEI EL and BURLINGTON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEISEI EL 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 KEISEI EL RAILWAY 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.