Correlation Between Burlington Stores and Palomar Holdings
Can any of the company-specific risk be diversified away by investing in both Burlington Stores and Palomar Holdings 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 Palomar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burlington Stores and Palomar Holdings, you can compare the effects of market volatilities on Burlington Stores and Palomar Holdings 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 Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and Palomar Holdings.
Diversification Opportunities for Burlington Stores and Palomar Holdings
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Burlington and Palomar is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings 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 Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of Burlington Stores i.e., Burlington Stores and Palomar Holdings go up and down completely randomly.
Pair Corralation between Burlington Stores and Palomar Holdings
Given the investment horizon of 90 days Burlington Stores is expected to generate 2.21 times less return on investment than Palomar Holdings. But when comparing it to its historical volatility, Burlington Stores is 1.03 times less risky than Palomar Holdings. It trades about 0.04 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,450 in Palomar Holdings on September 19, 2024 and sell it today you would earn a total of 6,024 from holding Palomar Holdings or generate 135.37% 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. Palomar Holdings
Performance |
| Timeline |
| Burlington Stores |
| Palomar Holdings |
Burlington Stores and Palomar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burlington Stores and Palomar Holdings
The main advantage of trading using opposite Burlington Stores and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.| Burlington Stores vs. Capri Holdings | Burlington Stores vs. Movado Group | Burlington Stores vs. Tapestry | Burlington Stores vs. Brilliant Earth Group |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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