Correlation Between Lululemon Athletica and BECTON

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

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

Diversification Opportunities for Lululemon Athletica and BECTON

-0.24

Correlation Coefficient

Lululemon Athletica  BECTON

Very good diversification

The 3 months correlation between Lululemon and BECTON is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and BECTON DICKINSON AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECTON DICKINSON AND 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 BECTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECTON DICKINSON AND has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and BECTON go up and down completely randomly.

Pair Corralation between Lululemon Athletica and BECTON

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 9.49 times more return on investment than BECTON. However, Lululemon Athletica is 9.49 times more volatile than BECTON DICKINSON AND. It trades about 0.02 of its potential returns per unit of risk. BECTON DICKINSON AND is currently generating about 0.02 per unit of risk. If you would invest  34,227  in Lululemon Athletica on December 4, 2024 and sell it today you would earn a total of  554.00  from holding Lululemon Athletica or generate 1.62% return on investment over 90 days.

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

Lululemon Athletica  vs.  BECTON DICKINSON AND

Lululemon Athletica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Lululemon Athletica is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

BECTON DICKINSON AND

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BECTON DICKINSON AND are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BECTON is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lululemon Athletica and BECTON

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

The idea behind Lululemon Athletica and BECTON DICKINSON AND 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.