Correlation Between Burlington Stores and First Solar

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

By analyzing existing cross correlation between Burlington Stores and First Solar, you can compare the effects of market volatilities on Burlington Stores and First Solar 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 First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and First Solar.

Diversification Opportunities for Burlington Stores and First Solar

-0.17

Correlation Coefficient

Burlington Stores  First Solar

Good diversification

The 3 months correlation between Burlington and First is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Burlington Stores i.e., Burlington Stores and First Solar go up and down completely randomly.

Pair Corralation between Burlington Stores and First Solar

Assuming the 90 days trading horizon Burlington Stores is expected to generate 1.54 times less return on investment than First Solar. But when comparing it to its historical volatility, Burlington Stores is 1.47 times less risky than First Solar. It trades about 0.21 of its potential returns per unit of risk. First Solar is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  275,395  in First Solar on April 24, 2025 and sell it today you would earn a total of  53,405  from holding First Solar or generate 19.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Burlington Stores  vs.  First Solar

Burlington Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Solar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, First Solar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burlington Stores and First Solar

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

The idea behind Burlington Stores and First Solar 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.