Correlation Between Lululemon Athletica and Innovative International

Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Innovative 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 Innovative 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 Innovative International Acquisition, you can compare the effects of market volatilities on Lululemon Athletica and Innovative 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 Innovative International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Innovative International.

Diversification Opportunities for Lululemon Athletica and Innovative International

0.47

Correlation Coefficient

Lululemon Athletica  Innovative International

Very weak diversification

The 3 months correlation between Lululemon and Innovative is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Innovative International Acqui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative 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 Innovative International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative International has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Innovative International go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Innovative International

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 2.53 times more return on investment than Innovative International. However, Lululemon Athletica is 2.53 times more volatile than Innovative International Acquisition. It trades about 0.03 of its potential returns per unit of risk. Innovative International Acquisition is currently generating about 0.03 per unit of risk. If you would invest  30,688  in Lululemon Athletica on October 22, 2024 and sell it today you would earn a total of  6,682  from holding Lululemon Athletica or generate 21.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	24.4%
Values	Daily Returns

Lululemon Athletica  vs.  Innovative International Acqui

Lululemon Athletica

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 10 (%) 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.

Innovative International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative International Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Innovative International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lululemon Athletica and Innovative International

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

The idea behind Lululemon Athletica and Innovative International Acquisition 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.