Correlation Between Lululemon Athletica and Sidus Space

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

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

Diversification Opportunities for Lululemon Athletica and Sidus Space

-0.06

Correlation Coefficient

Lululemon Athletica  Sidus Space

Good diversification

The 3 months correlation between Lululemon and Sidus is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Sidus Space in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sidus Space 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 Sidus Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sidus Space has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Sidus Space go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Sidus Space

Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the Sidus Space. But the stock apears to be less risky and, when comparing its historical volatility, Lululemon Athletica is 7.07 times less risky than Sidus Space. The stock trades about -0.04 of its potential returns per unit of risk. The Sidus Space is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  881.00  in Sidus Space on September 24, 2024 and sell it today you would lose (485.00) from holding Sidus Space or give up 55.05% of portfolio value over 90 days.

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

Lululemon Athletica  vs.  Sidus Space

Lululemon Athletica

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sidus Space

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sidus Space are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Sidus Space unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lululemon Athletica and Sidus Space

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

The idea behind Lululemon Athletica and Sidus Space 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.