Correlation Between Fast Retailing and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Burlington Stores 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 Fast Retailing and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Burlington Stores, you can compare the effects of market volatilities on Fast Retailing and Burlington Stores 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 Fast Retailing with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Burlington Stores.
Diversification Opportunities for Fast Retailing and Burlington Stores
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fast and Burlington is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Fast Retailing 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 Fast Retailing Co are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Fast Retailing i.e., Fast Retailing and Burlington Stores go up and down completely randomly.
Pair Corralation between Fast Retailing and Burlington Stores
Assuming the 90 days horizon Fast Retailing Co is expected to generate 6.71 times more return on investment than Burlington Stores. However, Fast Retailing is 6.71 times more volatile than Burlington Stores. It trades about 0.04 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.04 per unit of risk. If you would invest 61,000 in Fast Retailing Co on September 2, 2024 and sell it today you would lose (28,935) from holding Fast Retailing Co or give up 47.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 76.01% |
| Values | Daily Returns |
Fast Retailing Co vs. Burlington Stores
Performance |
| Timeline |
| Fast Retailing |
| Burlington Stores |
Fast Retailing and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Burlington Stores
The main advantage of trading using opposite Fast Retailing and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Burlington Stores 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 Burlington Stores will offset losses from the drop in Burlington Stores' long position.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco | Fast Retailing vs. Ross Stores |
| Burlington Stores vs. The TJX Companies | Burlington Stores vs. Guess Inc | Burlington Stores vs. Urban Outfitters | Burlington Stores vs. Childrens Place |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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