Correlation Between Lululemon Athletica and Guess

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

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

Diversification Opportunities for Lululemon Athletica and Guess

0.64

Correlation Coefficient

Lululemon Athletica  Guess

Poor diversification

The 3 months correlation between Lululemon and Guess is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Guess Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guess Inc 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 Guess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guess Inc has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Guess go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Guess

Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the Guess. But the stock apears to be less risky and, when comparing its historical volatility, Lululemon Athletica is 1.82 times less risky than Guess. The stock trades about -0.15 of its potential returns per unit of risk. The Guess Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,386  in Guess Inc on December 29, 2024 and sell it today you would lose (279.00) from holding Guess Inc or give up 20.13% of portfolio value over 90 days.

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

Lululemon Athletica  vs.  Guess Inc

Lululemon Athletica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lululemon Athletica has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Guess Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guess Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lululemon Athletica and Guess

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

The idea behind Lululemon Athletica and Guess Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.