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 CDR, 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
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Burlington and COSTCO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR 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 CDR 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 21.75 times less return on investment than COSTCO WHOLESALE. But when comparing it to its historical volatility, Burlington Stores is 1.25 times less risky than COSTCO WHOLESALE. It trades about 0.01 of its potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,800 in COSTCO WHOLESALE CDR on November 4, 2024 and sell it today you would earn a total of 140.00 from holding COSTCO WHOLESALE CDR or generate 5.0% 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. COSTCO WHOLESALE CDR
Performance |
| Timeline |
| Burlington Stores |
| COSTCO WHOLESALE CDR |
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. Mount Gibson Iron | Burlington Stores vs. ANGANG STEEL H | Burlington Stores vs. SOLSTAD OFFSHORE NK | Burlington Stores vs. Eidesvik Offshore ASA |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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