Correlation Between Burlington Stores and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Burlington Stores and Ally Financial 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 Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burlington Stores and Ally Financial, you can compare the effects of market volatilities on Burlington Stores and Ally Financial 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 Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and Ally Financial.
Diversification Opportunities for Burlington Stores and Ally Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Burlington and Ally is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Burlington Stores i.e., Burlington Stores and Ally Financial go up and down completely randomly.
Pair Corralation between Burlington Stores and Ally Financial
Assuming the 90 days trading horizon Burlington Stores is expected to generate 1.48 times less return on investment than Ally Financial. But when comparing it to its historical volatility, Burlington Stores is 1.24 times less risky than Ally Financial. It trades about 0.04 of its potential returns per unit of risk. Ally Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,162 in Ally Financial on September 26, 2024 and sell it today you would earn a total of 1,171 from holding Ally Financial or generate 54.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Burlington Stores vs. Ally Financial
Performance |
| Timeline |
| Burlington Stores |
| Ally Financial |
Burlington Stores and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burlington Stores and Ally Financial
The main advantage of trading using opposite Burlington Stores and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Burlington Stores vs. Apple Inc | Burlington Stores vs. Apple Inc | Burlington Stores vs. Apple Inc | Burlington Stores vs. Apple Inc |
| Ally Financial vs. Far East Horizon | Ally Financial vs. Walker Dunlop | Ally Financial vs. Paragon Banking Group | Ally Financial vs. Hercules Capital |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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