Correlation Between Lululemon Athletica and CONSTELLATION

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

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

Diversification Opportunities for Lululemon Athletica and CONSTELLATION

0.22

Correlation Coefficient

Lululemon Athletica  CONSTELLATION

Modest diversification

The 3 months correlation between Lululemon and CONSTELLATION is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and CONSTELLATION go up and down completely randomly.

Pair Corralation between Lululemon Athletica and CONSTELLATION

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 3.87 times more return on investment than CONSTELLATION. However, Lululemon Athletica is 3.87 times more volatile than CONSTELLATION BRANDS INC. It trades about 0.14 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.57 per unit of risk. If you would invest  34,227  in Lululemon Athletica on October 5, 2024 and sell it today you would earn a total of  3,591  from holding Lululemon Athletica or generate 10.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	52.38%
Values	Daily Returns

Lululemon Athletica  vs.  CONSTELLATION BRANDS INC

Lululemon Athletica

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 15 (%) 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.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION BRANDS INC investors.

Pair Trading with Lululemon Athletica and CONSTELLATION

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

The idea behind Lululemon Athletica and CONSTELLATION BRANDS INC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.