Correlation Between BRP and Lululemon Athletica

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

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

Diversification Opportunities for BRP and Lululemon Athletica

-0.89

Correlation Coefficient

BRP  Lululemon Athletica

Pay attention - limited upside

The 3 months correlation between BRP and Lululemon is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and BRP 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 BRP Inc 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 BRP i.e., BRP and Lululemon Athletica go up and down completely randomly.

Pair Corralation between BRP and Lululemon Athletica

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Lululemon Athletica. In addition to that, BRP is 1.03 times more volatile than Lululemon Athletica. It trades about -0.08 of its total potential returns per unit of risk. Lululemon Athletica is currently generating about 0.03 per unit of volatility. If you would invest  30,662  in Lululemon Athletica on September 1, 2024 and sell it today you would earn a total of  1,404  from holding Lululemon Athletica or generate 4.58% return on investment over 90 days.

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

BRP Inc  vs.  Lululemon Athletica

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lululemon Athletica

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRP and Lululemon Athletica

The main advantage of trading using opposite BRP and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP 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 BRP Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .