Correlation Between Lululemon Athletica and SHF Holdings

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

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

Diversification Opportunities for Lululemon Athletica and SHF Holdings

0.6

Correlation Coefficient

Lululemon Athletica  SHF Holdings

Poor diversification

The 3 months correlation between Lululemon and SHF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and SHF Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHF Holdings 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 SHF Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHF Holdings has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and SHF Holdings go up and down completely randomly.

Pair Corralation between Lululemon Athletica and SHF Holdings

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.19 times more return on investment than SHF Holdings. However, Lululemon Athletica is 5.33 times less risky than SHF Holdings. It trades about -0.08 of its potential returns per unit of risk. SHF Holdings is currently generating about -0.05 per unit of risk. If you would invest  38,405  in Lululemon Athletica on December 28, 2024 and sell it today you would lose (4,252) from holding Lululemon Athletica or give up 11.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.67%
Values	Daily Returns

Lululemon Athletica  vs.  SHF Holdings

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 latest unfluctuating performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SHF Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHF Holdings 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lululemon Athletica and SHF Holdings

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

The idea behind Lululemon Athletica and SHF Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.