Correlation Between NorthWestern and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both NorthWestern 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 NorthWestern and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and Burlington Stores, you can compare the effects of market volatilities on NorthWestern 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 NorthWestern with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and Burlington Stores.
Diversification Opportunities for NorthWestern and Burlington Stores
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NorthWestern and Burlington is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and NorthWestern 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 NorthWestern 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 NorthWestern i.e., NorthWestern and Burlington Stores go up and down completely randomly.
Pair Corralation between NorthWestern and Burlington Stores
Considering the 90-day investment horizon NorthWestern is expected to under-perform the Burlington Stores. But the stock apears to be less risky and, when comparing its historical volatility, NorthWestern is 1.22 times less risky than Burlington Stores. The stock trades about -0.04 of its potential returns per unit of risk. The Burlington Stores is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 25,328 in Burlington Stores on August 29, 2024 and sell it today you would earn a total of 3,366 from holding Burlington Stores or generate 13.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorthWestern vs. Burlington Stores
Performance |
| Timeline |
| NorthWestern |
| Burlington Stores |
NorthWestern and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and Burlington Stores
The main advantage of trading using opposite NorthWestern and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern 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.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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