Correlation Between Lululemon Athletica and ScanSource

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Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and ScanSource 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 ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and ScanSource, you can compare the effects of market volatilities on Lululemon Athletica and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and ScanSource.

Diversification Opportunities for Lululemon Athletica and ScanSource

LululemonScanSourceDiversified AwayLululemonScanSourceDiversified Away100%
0.31
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Lululemon Athletica and ScanSource

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.18 times more return on investment than ScanSource. However, Lululemon Athletica is 1.18 times more volatile than ScanSource. It trades about 0.15 of its potential returns per unit of risk. ScanSource is currently generating about 0.09 per unit of risk. If you would invest  30,754  in Lululemon Athletica on October 26, 2024 and sell it today you would earn a total of  8,031  from holding Lululemon Athletica or generate 26.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lululemon Athletica  vs.  ScanSource

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10010203040
JavaScript chart by amCharts 3.21.15LULU SCSC
       Timeline  
Lululemon Athletica 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 11 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan300320340360380400420
ScanSource 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ScanSource exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan42444648505254

Lululemon Athletica and ScanSource Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.65-6.48-4.31-2.140.03962.384.757.139.51 0.010.020.030.040.050.06
JavaScript chart by amCharts 3.21.15LULU SCSC
       Returns  

Pair Trading with Lululemon Athletica and ScanSource

The main advantage of trading using opposite Lululemon Athletica and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.
The idea behind Lululemon Athletica and ScanSource 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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