Correlation Between GM and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Burlington Stores, you can compare the effects of market volatilities on GM 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 GM with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Burlington Stores.
Diversification Opportunities for GM and Burlington Stores
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Burlington is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and GM 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 General Motors 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 GM i.e., GM and Burlington Stores go up and down completely randomly.
Pair Corralation between GM and Burlington Stores
Allowing for the 90-day total investment horizon GM is expected to generate 1.59 times less return on investment than Burlington Stores. In addition to that, GM is 1.42 times more volatile than Burlington Stores. It trades about 0.12 of its total potential returns per unit of risk. Burlington Stores is currently generating about 0.27 per unit of volatility. If you would invest 25,738 in Burlington Stores on August 31, 2024 and sell it today you would earn a total of 3,098 from holding Burlington Stores or generate 12.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Burlington Stores
Performance |
| Timeline |
| General Motors |
| Burlington Stores |
GM and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Burlington Stores
The main advantage of trading using opposite GM and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Burlington Stores pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Burlington Stores vs. Ross Stores | Burlington Stores vs. Childrens Place | Burlington Stores vs. Buckle Inc | Burlington Stores vs. Guess Inc |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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