Correlation Between Lululemon Athletica and Williams Sonoma

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Williams Sonoma 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 Williams Sonoma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Williams Sonoma, you can compare the effects of market volatilities on Lululemon Athletica and Williams Sonoma 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 Williams Sonoma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Williams Sonoma.

Diversification Opportunities for Lululemon Athletica and Williams Sonoma

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lululemon and Williams is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Williams Sonoma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Sonoma 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 Williams Sonoma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Sonoma has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Williams Sonoma go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Williams Sonoma

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.12 times less return on investment than Williams Sonoma. But when comparing it to its historical volatility, Lululemon Athletica is 1.34 times less risky than Williams Sonoma. It trades about 0.08 of its potential returns per unit of risk. Williams Sonoma is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,719  in Williams Sonoma on September 24, 2024 and sell it today you would earn a total of  3,649  from holding Williams Sonoma or generate 24.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.21%
ValuesDaily Returns

Lululemon Athletica  vs.  Williams Sonoma

 Performance 
       Timeline  
Lululemon Athletica 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
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.
Williams Sonoma 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

Lululemon Athletica and Williams Sonoma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lululemon Athletica and Williams Sonoma

The main advantage of trading using opposite Lululemon Athletica and Williams Sonoma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Williams Sonoma 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 Williams Sonoma will offset losses from the drop in Williams Sonoma's long position.
The idea behind Lululemon Athletica and Williams Sonoma 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.
Check out your portfolio center.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

Other Complementary Tools

Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Content Syndication
Quickly integrate customizable finance content to your own investment portal