Correlation Between Burlington Stores and Aozora Bank
Can any of the company-specific risk be diversified away by investing in both Burlington Stores and Aozora Bank 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 Aozora Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burlington Stores and Aozora Bank, you can compare the effects of market volatilities on Burlington Stores and Aozora Bank 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 Aozora Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and Aozora Bank.
Diversification Opportunities for Burlington Stores and Aozora Bank
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Burlington and Aozora is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank 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 Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of Burlington Stores i.e., Burlington Stores and Aozora Bank go up and down completely randomly.
Pair Corralation between Burlington Stores and Aozora Bank
Assuming the 90 days trading horizon Burlington Stores is expected to generate 1.03 times more return on investment than Aozora Bank. However, Burlington Stores is 1.03 times more volatile than Aozora Bank. It trades about 0.04 of its potential returns per unit of risk. Aozora Bank is currently generating about -0.01 per unit of risk. If you would invest 20,800 in Burlington Stores on October 16, 2024 and sell it today you would earn a total of 7,000 from holding Burlington Stores or generate 33.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Burlington Stores vs. Aozora Bank
Performance |
| Timeline |
| Burlington Stores |
| Aozora Bank |
Burlington Stores and Aozora Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burlington Stores and Aozora Bank
The main advantage of trading using opposite Burlington Stores and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, Aozora Bank 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 Aozora Bank will offset losses from the drop in Aozora Bank's long position.The idea behind Burlington Stores and Aozora Bank 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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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 Stocks Directory module to find actively traded stocks across global markets.
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