Correlation Between American Airlines and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both American Airlines 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 American Airlines and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Burlington Stores, you can compare the effects of market volatilities on American Airlines 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 American Airlines with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Burlington Stores.
Diversification Opportunities for American Airlines and Burlington Stores
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Burlington is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and American Airlines 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 American Airlines Group 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 American Airlines i.e., American Airlines and Burlington Stores go up and down completely randomly.
Pair Corralation between American Airlines and Burlington Stores
Considering the 90-day investment horizon American Airlines is expected to generate 2.04 times less return on investment than Burlington Stores. In addition to that, American Airlines is 1.25 times more volatile than Burlington Stores. It trades about 0.16 of its total potential returns per unit of risk. Burlington Stores is currently generating about 0.41 per unit of volatility. If you would invest 24,270 in Burlington Stores on September 2, 2024 and sell it today you would earn a total of 3,918 from holding Burlington Stores or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Burlington Stores
Performance |
| Timeline |
| American Airlines |
| Burlington Stores |
American Airlines and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Burlington Stores
The main advantage of trading using opposite American Airlines and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines 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.| American Airlines vs. Canadian Pacific Railway | American Airlines vs. Werner Enterprises | American Airlines vs. Canadian National Railway | American Airlines vs. CSX Corporation |
| Burlington Stores vs. The TJX Companies | Burlington Stores vs. Guess Inc | Burlington Stores vs. Urban Outfitters | Burlington Stores vs. Childrens Place |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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