Correlation Between BURLINGTON STORES and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both BURLINGTON STORES and Costco Wholesale 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 BURLINGTON STORES and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BURLINGTON STORES and Costco Wholesale Corp, you can compare the effects of market volatilities on BURLINGTON STORES and Costco Wholesale 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 BURLINGTON STORES with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of BURLINGTON STORES and Costco Wholesale.
Diversification Opportunities for BURLINGTON STORES and Costco Wholesale
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BURLINGTON and Costco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and BURLINGTON STORES 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 BURLINGTON STORES are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and Costco Wholesale go up and down completely randomly.
Pair Corralation between BURLINGTON STORES and Costco Wholesale
Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.67 times more return on investment than Costco Wholesale. However, BURLINGTON STORES is 1.67 times more volatile than Costco Wholesale Corp. It trades about -0.15 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about -0.37 per unit of risk. If you would invest 24,600 in BURLINGTON STORES on December 13, 2024 and sell it today you would lose (3,000) from holding BURLINGTON STORES or give up 12.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BURLINGTON STORES vs. Costco Wholesale Corp
Performance |
| Timeline |
| BURLINGTON STORES |
| Costco Wholesale Corp |
BURLINGTON STORES and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BURLINGTON STORES and Costco Wholesale
The main advantage of trading using opposite BURLINGTON STORES and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BURLINGTON STORES position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| BURLINGTON STORES vs. KOBE STEEL LTD | ||
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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