Correlation Between Kaiser Aluminum and BURLINGTON STORES

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

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

Diversification Opportunities for Kaiser Aluminum and BURLINGTON STORES

0.54

Correlation Coefficient

Kaiser Aluminum  BURLINGTON STORES

Very weak diversification

The 3 months correlation between Kaiser and BURLINGTON is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and BURLINGTON STORES

Assuming the 90 days trading horizon Kaiser Aluminum is expected to under-perform the BURLINGTON STORES. In addition to that, Kaiser Aluminum is 1.07 times more volatile than BURLINGTON STORES. It trades about -0.54 of its total potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.04 per unit of volatility. If you would invest  27,200  in BURLINGTON STORES on October 5, 2024 and sell it today you would earn a total of  200.00  from holding BURLINGTON STORES or generate 0.74% return on investment over 90 days.

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

Kaiser Aluminum  vs.  BURLINGTON STORES

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BURLINGTON STORES

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BURLINGTON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaiser Aluminum and BURLINGTON STORES

The main advantage of trading using opposite Kaiser Aluminum and BURLINGTON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.