Correlation Between Birchcliff Energy and Burberry Group

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

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

Diversification Opportunities for Birchcliff Energy and Burberry Group

-0.53

Correlation Coefficient

Birchcliff Energy  Burberry Group

Excellent diversification

The 3 months correlation between Birchcliff and Burberry is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Birchcliff Energy and Burberry Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burberry Group Plc and Birchcliff Energy 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 Birchcliff Energy are associated (or correlated) with Burberry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burberry Group Plc has no effect on the direction of Birchcliff Energy i.e., Birchcliff Energy and Burberry Group go up and down completely randomly.

Pair Corralation between Birchcliff Energy and Burberry Group

Assuming the 90 days trading horizon Birchcliff Energy is expected to generate 1.31 times more return on investment than Burberry Group. However, Birchcliff Energy is 1.31 times more volatile than Burberry Group Plc. It trades about 0.22 of its potential returns per unit of risk. Burberry Group Plc is currently generating about -0.17 per unit of risk. If you would invest  519.00  in Birchcliff Energy on January 25, 2024 and sell it today you would earn a total of  53.00  from holding Birchcliff Energy or generate 10.21% return on investment over 90 days.

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

Birchcliff Energy  vs.  Burberry Group Plc

Birchcliff Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Birchcliff Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Birchcliff Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Birchcliff Energy and Burberry Group

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

The idea behind Birchcliff Energy and Burberry Group Plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.