Correlation Between Birks and Burlington Stores

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

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

Diversification Opportunities for Birks and Burlington Stores

0.34

Correlation Coefficient

Birks  Burlington Stores

Weak diversification

The 3 months correlation between Birks and Burlington is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Birks 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 Birks Group 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 Birks i.e., Birks and Burlington Stores go up and down completely randomly.

Pair Corralation between Birks and Burlington Stores

Considering the 90-day investment horizon Birks Group is expected to under-perform the Burlington Stores. In addition to that, Birks is 2.24 times more volatile than Burlington Stores. It trades about -0.08 of its total potential returns per unit of risk. Burlington Stores is currently generating about 0.01 per unit of volatility. If you would invest  19,373  in Burlington Stores on February 20, 2024 and sell it today you would lose (59.00) from holding Burlington Stores or give up 0.3% of portfolio value over 90 days.

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

Birks Group  vs.  Burlington Stores

Birks Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Burlington Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Burlington Stores is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Birks and Burlington Stores

The main advantage of trading using opposite Birks and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birks 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 Birks Group 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.