Correlation Between Lululemon Athletica and Cooper Stnd

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

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

Diversification Opportunities for Lululemon Athletica and Cooper Stnd

0.31

Correlation Coefficient

Lululemon Athletica  Cooper Stnd

Weak diversification

The 3 months correlation between Lululemon and Cooper is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Cooper Stnd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cooper Stnd and Lululemon Athletica 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 Lululemon Athletica are associated (or correlated) with Cooper Stnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cooper Stnd has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Cooper Stnd go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Cooper Stnd

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.71 times more return on investment than Cooper Stnd. However, Lululemon Athletica is 1.4 times less risky than Cooper Stnd. It trades about 0.21 of its potential returns per unit of risk. Cooper Stnd is currently generating about 0.02 per unit of risk. If you would invest  27,038  in Lululemon Athletica on October 4, 2024 and sell it today you would earn a total of  11,203  from holding Lululemon Athletica or generate 41.43% return on investment over 90 days.

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

Lululemon Athletica  vs.  Cooper Stnd

Lululemon Athletica

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cooper Stnd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cooper Stnd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cooper Stnd 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 Lululemon Athletica and Cooper Stnd

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

The idea behind Lululemon Athletica and Cooper Stnd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.