Correlation Between Lululemon Athletica and Ross Stores

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

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

Diversification Opportunities for Lululemon Athletica and Ross Stores

0.86

Correlation Coefficient

Lululemon Athletica  Ross Stores

Very poor diversification

The 3 months correlation between Lululemon and Ross is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Ross Stores go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Ross Stores

Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the Ross Stores. In addition to that, Lululemon Athletica is 1.89 times more volatile than Ross Stores. It trades about -0.15 of its total potential returns per unit of risk. Ross Stores is currently generating about -0.2 per unit of volatility. If you would invest  15,101  in Ross Stores on December 29, 2024 and sell it today you would lose (2,559) from holding Ross Stores or give up 16.95% of portfolio value over 90 days.

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

Lululemon Athletica  vs.  Ross Stores

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.

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic 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 Ross Stores

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

The idea behind Lululemon Athletica and Ross Stores 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.