Correlation Between Birkenstock Holding and Lululemon Athletica

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

By analyzing existing cross correlation between Birkenstock Holding plc and Lululemon Athletica, you can compare the effects of market volatilities on Birkenstock Holding and Lululemon Athletica 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 Birkenstock Holding with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birkenstock Holding and Lululemon Athletica.

Diversification Opportunities for Birkenstock Holding and Lululemon Athletica

0.71

Correlation Coefficient

Birkenstock Holding  Lululemon Athletica

Poor diversification

The 3 months correlation between Birkenstock and Lululemon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Birkenstock Holding plc and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Birkenstock Holding 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 Birkenstock Holding plc are associated (or correlated) with Lululemon Athletica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lululemon Athletica has no effect on the direction of Birkenstock Holding i.e., Birkenstock Holding and Lululemon Athletica go up and down completely randomly.

Pair Corralation between Birkenstock Holding and Lululemon Athletica

Given the investment horizon of 90 days Birkenstock Holding plc is expected to generate 0.88 times more return on investment than Lululemon Athletica. However, Birkenstock Holding plc is 1.13 times less risky than Lululemon Athletica. It trades about -0.4 of its potential returns per unit of risk. Lululemon Athletica is currently generating about -0.37 per unit of risk. If you would invest  5,572  in Birkenstock Holding plc on December 3, 2024 and sell it today you would lose (766.00) from holding Birkenstock Holding plc or give up 13.75% of portfolio value over 90 days.

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

Birkenstock Holding plc  vs.  Lululemon Athletica

Birkenstock Holding plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birkenstock Holding plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Lululemon Athletica

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Lululemon Athletica is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Birkenstock Holding and Lululemon Athletica

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

The idea behind Birkenstock Holding plc and Lululemon Athletica 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 Transaction History module to view history of all your transactions and understand their impact on performance.