Correlation Between Lululemon Athletica and Williams Sonoma
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.21% |
Values | Daily Returns |
Lululemon Athletica vs. Williams Sonoma
Performance |
Timeline |
Lululemon Athletica |
Williams Sonoma |
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.Lululemon Athletica vs. Amer Sports, | Lululemon Athletica vs. Brunswick | Lululemon Athletica vs. BRP Inc | Lululemon Athletica vs. Vision Marine Technologies |
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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.
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