Correlation Between Lululemon Athletica and United Guardian

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

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

Diversification Opportunities for Lululemon Athletica and United Guardian

0.28

Correlation Coefficient

Lululemon Athletica  United Guardian

Modest diversification

The 3 months correlation between Lululemon and United is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and United Guardian go up and down completely randomly.

Pair Corralation between Lululemon Athletica and United Guardian

Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the United Guardian. In addition to that, Lululemon Athletica is 1.07 times more volatile than United Guardian. It trades about -0.11 of its total potential returns per unit of risk. United Guardian is currently generating about 0.06 per unit of volatility. If you would invest  938.00  in United Guardian on December 20, 2024 and sell it today you would earn a total of  50.00  from holding United Guardian or generate 5.33% return on investment over 90 days.

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

Lululemon Athletica  vs.  United Guardian

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.

United Guardian

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Guardian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, United Guardian may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lululemon Athletica and United Guardian

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

The idea behind Lululemon Athletica and United Guardian 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 Anywhere module to track or share privately all of your investments from the convenience of any device.