Correlation Between NI Holdings and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both NI Holdings 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 NI Holdings and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NI Holdings and Burlington Stores, you can compare the effects of market volatilities on NI Holdings 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 NI Holdings with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of NI Holdings and Burlington Stores.
Diversification Opportunities for NI Holdings and Burlington Stores
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NODK and Burlington is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Burlington Stores go up and down completely randomly.
Pair Corralation between NI Holdings and Burlington Stores
Given the investment horizon of 90 days NI Holdings is expected to generate 3.01 times less return on investment than Burlington Stores. In addition to that, NI Holdings is 1.04 times more volatile than Burlington Stores. It trades about 0.03 of its total potential returns per unit of risk. Burlington Stores is currently generating about 0.08 per unit of volatility. If you would invest 23,998 in Burlington Stores on September 19, 2024 and sell it today you would earn a total of 4,236 from holding Burlington Stores or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NI Holdings vs. Burlington Stores
Performance |
| Timeline |
| NI Holdings |
| Burlington Stores |
NI Holdings and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NI Holdings and Burlington Stores
The main advantage of trading using opposite NI Holdings and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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. 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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