Correlation Between Lands End and Burlington Stores

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

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

Diversification Opportunities for Lands End and Burlington Stores

0.9

Correlation Coefficient

Lands End  Burlington Stores

Almost no diversification

The 3 months correlation between Lands and Burlington is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Lands End 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 Lands End 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 Lands End i.e., Lands End and Burlington Stores go up and down completely randomly.

Pair Corralation between Lands End and Burlington Stores

Allowing for the 90-day total investment horizon Lands End is expected to under-perform the Burlington Stores. In addition to that, Lands End is 1.3 times more volatile than Burlington Stores. It trades about -0.07 of its total potential returns per unit of risk. Burlington Stores is currently generating about -0.08 per unit of volatility. If you would invest  28,480  in Burlington Stores on December 28, 2024 and sell it today you would lose (3,921) from holding Burlington Stores or give up 13.77% of portfolio value over 90 days.

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

Lands End  vs.  Burlington Stores

Lands End

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lands End has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Burlington Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lands End and Burlington Stores

The main advantage of trading using opposite Lands End and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End 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 Lands End 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.