Correlation Between Lululemon Athletica and VinFast Auto

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

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

Diversification Opportunities for Lululemon Athletica and VinFast Auto

0.64

Correlation Coefficient

Lululemon Athletica  VinFast Auto

Poor diversification

The 3 months correlation between Lululemon and VinFast is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and VinFast Auto Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VinFast Auto 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 VinFast Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VinFast Auto has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and VinFast Auto go up and down completely randomly.

Pair Corralation between Lululemon Athletica and VinFast Auto

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.37 times more return on investment than VinFast Auto. However, Lululemon Athletica is 2.7 times less risky than VinFast Auto. It trades about 0.21 of its potential returns per unit of risk. VinFast Auto Ltd is currently generating about 0.05 per unit of risk. If you would invest  26,882  in Lululemon Athletica on September 26, 2024 and sell it today you would earn a total of  11,467  from holding Lululemon Athletica or generate 42.66% return on investment over 90 days.

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

Lululemon Athletica  vs.  VinFast Auto Ltd

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.

VinFast Auto

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VinFast Auto Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, VinFast Auto showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lululemon Athletica and VinFast Auto

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

The idea behind Lululemon Athletica and VinFast Auto Ltd 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.