Correlation Between BURLINGTON STORES and CARSALES

Can any of the company-specific risk be diversified away by investing in both BURLINGTON STORES and CARSALES 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 CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BURLINGTON STORES and CARSALESCOM, you can compare the effects of market volatilities on BURLINGTON STORES and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of BURLINGTON STORES and CARSALES.

Diversification Opportunities for BURLINGTON STORES and CARSALES

0.31

Correlation Coefficient

BURLINGTON STORES  CARSALES

Weak diversification

The 3 months correlation between BURLINGTON and CARSALES is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON STORES and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of BURLINGTON STORES i.e., BURLINGTON STORES and CARSALES go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and CARSALES

Assuming the 90 days trading horizon BURLINGTON STORES is expected to generate 1.54 times more return on investment than CARSALES. However, BURLINGTON STORES is 1.54 times more volatile than CARSALESCOM. It trades about 0.04 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.05 per unit of risk. If you would invest  15,700  in BURLINGTON STORES on April 15, 2025 and sell it today you would earn a total of  5,500  from holding BURLINGTON STORES or generate 35.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BURLINGTON STORES  vs.  CARSALESCOM

BURLINGTON STORES

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, BURLINGTON STORES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CARSALESCOM

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CARSALES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BURLINGTON STORES and CARSALES

The main advantage of trading using opposite BURLINGTON STORES and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BURLINGTON STORES position performs unexpectedly, CARSALES 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 CARSALES will offset losses from the drop in CARSALES's long position.

The idea behind BURLINGTON STORES and CARSALESCOM 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.