Correlation Between Lululemon Athletica and Dyadic International

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

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

Diversification Opportunities for Lululemon Athletica and Dyadic International

0.75

Correlation Coefficient

Lululemon Athletica  Dyadic International

Poor diversification

The 3 months correlation between Lululemon and Dyadic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Dyadic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dyadic International 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 Dyadic International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dyadic International has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Dyadic International go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Dyadic International

Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the Dyadic International. But the stock apears to be less risky and, when comparing its historical volatility, Lululemon Athletica is 5.35 times less risky than Dyadic International. The stock trades about -0.04 of its potential returns per unit of risk. The Dyadic International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Dyadic International on October 12, 2024 and sell it today you would earn a total of  8.00  from holding Dyadic International or generate 4.85% return on investment over 90 days.

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

Lululemon Athletica  vs.  Dyadic International

Lululemon Athletica

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 15 (%) 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.

Dyadic International

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dyadic International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Dyadic International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lululemon Athletica and Dyadic International

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

The idea behind Lululemon Athletica and Dyadic International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.