Correlation Between BURLINGTON STORES and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both BURLINGTON STORES and Electronic Arts 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 Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BURLINGTON STORES and Electronic Arts, you can compare the effects of market volatilities on BURLINGTON STORES and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of BURLINGTON STORES and Electronic Arts.
Diversification Opportunities for BURLINGTON STORES and Electronic Arts
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BURLINGTON and Electronic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and Electronic Arts go up and down completely randomly.
Pair Corralation between BURLINGTON STORES and Electronic Arts
Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.81 times more return on investment than Electronic Arts. However, BURLINGTON STORES is 1.81 times more volatile than Electronic Arts. It trades about 0.22 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.4 per unit of risk. If you would invest 23,000 in BURLINGTON STORES on September 13, 2024 and sell it today you would earn a total of 4,400 from holding BURLINGTON STORES or generate 19.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BURLINGTON STORES vs. Electronic Arts
Performance |
| Timeline |
| BURLINGTON STORES |
| Electronic Arts |
BURLINGTON STORES and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BURLINGTON STORES and Electronic Arts
The main advantage of trading using opposite BURLINGTON STORES and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BURLINGTON STORES position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| BURLINGTON STORES vs. Apple Inc | BURLINGTON STORES vs. Apple Inc | BURLINGTON STORES vs. Apple Inc | BURLINGTON STORES vs. Apple Inc |
| Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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