Correlation Between Burlington Stores and Zumiez

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

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

Diversification Opportunities for Burlington Stores and Zumiez

-0.41

Correlation Coefficient

Burlington Stores  Zumiez

Very good diversification

The 3 months correlation between Burlington and Zumiez is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Burlington Stores and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc 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 Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of Burlington Stores i.e., Burlington Stores and Zumiez go up and down completely randomly.

Pair Corralation between Burlington Stores and Zumiez

Given the investment horizon of 90 days Burlington Stores is expected to generate 1.06 times less return on investment than Zumiez. But when comparing it to its historical volatility, Burlington Stores is 1.24 times less risky than Zumiez. It trades about 0.04 of its potential returns per unit of risk. Zumiez Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,631  in Zumiez Inc on February 15, 2024 and sell it today you would earn a total of  220.00  from holding Zumiez Inc or generate 13.49% return on investment over 90 days.

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

Burlington Stores  vs.  Zumiez Inc

Burlington Stores

Risk-Adjusted Performance

0 of 100

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Zumiez Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zumiez Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Zumiez is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Burlington Stores and Zumiez

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

The idea behind Burlington Stores and Zumiez Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.