Correlation Between Macys and Burlington Stores

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

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

Diversification Opportunities for Macys and Burlington Stores

0.61

Correlation Coefficient

Macys  Burlington Stores

Poor diversification

The 3 months correlation between Macys and Burlington is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Macys 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 Macys Inc 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 Macys i.e., Macys and Burlington Stores go up and down completely randomly.

Pair Corralation between Macys and Burlington Stores

Taking into account the 90-day investment horizon Macys Inc is expected to generate 1.32 times more return on investment than Burlington Stores. However, Macys is 1.32 times more volatile than Burlington Stores. It trades about 0.03 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.0 per unit of risk. If you would invest  1,613  in Macys Inc on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Macys Inc or generate 0.68% return on investment over 90 days.

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

Macys Inc  vs.  Burlington Stores

Macys Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Macys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Burlington Stores

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burlington Stores are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Burlington Stores is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Macys and Burlington Stores

The main advantage of trading using opposite Macys and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys 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 Macys Inc 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.