Correlation Between Tandy Leather and Burlington Stores

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

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

Diversification Opportunities for Tandy Leather and Burlington Stores

-0.43

Correlation Coefficient

Tandy Leather  Burlington Stores

Very good diversification

The 3 months correlation between Tandy and Burlington is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Tandy Leather 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 Tandy Leather Factory 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 Tandy Leather i.e., Tandy Leather and Burlington Stores go up and down completely randomly.

Pair Corralation between Tandy Leather and Burlington Stores

Considering the 90-day investment horizon Tandy Leather Factory is expected to generate 0.79 times more return on investment than Burlington Stores. However, Tandy Leather Factory is 1.27 times less risky than Burlington Stores. It trades about 0.02 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.0 per unit of risk. If you would invest  430.00  in Tandy Leather Factory on February 14, 2024 and sell it today you would earn a total of  35.00  from holding Tandy Leather Factory or generate 8.14% return on investment over 90 days.

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

Tandy Leather Factory  vs.  Burlington Stores

Tandy Leather Factory

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Tandy Leather is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Burlington Stores

Risk-Adjusted Performance

1 of 100

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. Despite quite persistent basic indicators, Burlington Stores is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tandy Leather and Burlington Stores

The main advantage of trading using opposite Tandy Leather and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandy Leather 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 Tandy Leather Factory 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.