Correlation Between Burberry Group and Ioneer

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

By analyzing existing cross correlation between Burberry Group Plc and ioneer Ltd American, you can compare the effects of market volatilities on Burberry Group and Ioneer 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 Burberry Group with a short position of Ioneer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burberry Group and Ioneer.

Diversification Opportunities for Burberry Group and Ioneer

-0.88

Correlation Coefficient

Burberry Group  Ioneer

Pay attention - limited upside

The 3 months correlation between Burberry and Ioneer is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Burberry Group Plc and ioneer Ltd American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ioneer American and Burberry Group 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 Burberry Group Plc are associated (or correlated) with Ioneer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ioneer American has no effect on the direction of Burberry Group i.e., Burberry Group and Ioneer go up and down completely randomly.

Pair Corralation between Burberry Group and Ioneer

Assuming the 90 days horizon Burberry Group Plc is expected to under-perform the Ioneer. But the pink sheet apears to be less risky and, when comparing its historical volatility, Burberry Group Plc is 3.28 times less risky than Ioneer. The pink sheet trades about -0.09 of its potential returns per unit of risk. The ioneer Ltd American is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  318.00  in ioneer Ltd American on February 15, 2024 and sell it today you would earn a total of  270.00  from holding ioneer Ltd American or generate 84.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Burberry Group Plc  vs.  ioneer Ltd American

Burberry Group Plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

ioneer American

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ioneer Ltd American are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Ioneer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burberry Group and Ioneer

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

The idea behind Burberry Group Plc and ioneer Ltd American 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.