Correlation Between Burlington Stores and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Burlington Stores and Southwest Airlines 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 Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burlington Stores and Southwest Airlines Co, you can compare the effects of market volatilities on Burlington Stores and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and Southwest Airlines.
Diversification Opportunities for Burlington Stores and Southwest Airlines
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Burlington and Southwest is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Burlington Stores i.e., Burlington Stores and Southwest Airlines go up and down completely randomly.
Pair Corralation between Burlington Stores and Southwest Airlines
Assuming the 90 days trading horizon Burlington Stores is expected to generate 0.93 times more return on investment than Southwest Airlines. However, Burlington Stores is 1.08 times less risky than Southwest Airlines. It trades about -0.04 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about -0.23 per unit of risk. If you would invest 28,200 in Burlington Stores on October 28, 2024 and sell it today you would lose (400.00) from holding Burlington Stores or give up 1.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Burlington Stores vs. Southwest Airlines Co
Performance |
| Timeline |
| Burlington Stores |
| Southwest Airlines |
Burlington Stores and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burlington Stores and Southwest Airlines
The main advantage of trading using opposite Burlington Stores and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Burlington Stores vs. Apple Inc | Burlington Stores vs. Apple Inc | Burlington Stores vs. Apple Inc | Burlington Stores vs. Apple Inc |
| Southwest Airlines vs. Easy Software AG | Southwest Airlines vs. SPORT LISBOA E | Southwest Airlines vs. Align Technology | Southwest Airlines vs. Computershare Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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