Correlation Between Pure Cycle and Burlington Stores

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

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

Diversification Opportunities for Pure Cycle and Burlington Stores

0.46

Correlation Coefficient

Pure Cycle  Burlington Stores

Very weak diversification

The 3 months correlation between Pure and Burlington is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Pure Cycle 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 Pure Cycle 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 Pure Cycle i.e., Pure Cycle and Burlington Stores go up and down completely randomly.

Pair Corralation between Pure Cycle and Burlington Stores

Given the investment horizon of 90 days Pure Cycle is expected to generate 1.13 times more return on investment than Burlington Stores. However, Pure Cycle is 1.13 times more volatile than Burlington Stores. It trades about -0.15 of its potential returns per unit of risk. Burlington Stores is currently generating about -0.19 per unit of risk. If you would invest  1,416  in Pure Cycle on December 4, 2024 and sell it today you would lose (255.00) from holding Pure Cycle or give up 18.01% of portfolio value over 90 days.

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

Pure Cycle  vs.  Burlington Stores

Pure Cycle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Cycle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 Pure Cycle and Burlington Stores

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