Correlation Between Burlington Stores and American Eagle
Can any of the company-specific risk be diversified away by investing in both Burlington Stores and American Eagle 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 American Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burlington Stores and American Eagle Outfitters, you can compare the effects of market volatilities on Burlington Stores and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burlington Stores and American Eagle.
Diversification Opportunities for Burlington Stores and American Eagle
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Burlington and American is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Burlington Stores i.e., Burlington Stores and American Eagle go up and down completely randomly.
Pair Corralation between Burlington Stores and American Eagle
Given the investment horizon of 90 days Burlington Stores is expected to under-perform the American Eagle. But the stock apears to be less risky and, when comparing its historical volatility, Burlington Stores is 1.06 times less risky than American Eagle. The stock trades about -0.16 of its potential returns per unit of risk. The American Eagle Outfitters is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,399 in American Eagle Outfitters on February 1, 2024 and sell it today you would lose (29.00) from holding American Eagle Outfitters or give up 1.21% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Burlington Stores vs. American Eagle Outfitters
Performance |
Timeline |
Burlington Stores |
American Eagle Outfitters |
Burlington Stores and American Eagle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Burlington Stores and American Eagle
The main advantage of trading using opposite Burlington Stores and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burlington Stores position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.Burlington Stores vs. JJill Inc | Burlington Stores vs. Shoe Carnival | Burlington Stores vs. Hibbett Sports | Burlington Stores vs. Buckle Inc |
American Eagle vs. JJill Inc | American Eagle vs. Shoe Carnival | American Eagle vs. Hibbett Sports | American Eagle vs. Buckle 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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