Correlation Between Playtika Holding and Lululemon Athletica

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

By analyzing existing cross correlation between Playtika Holding Corp and Lululemon Athletica, you can compare the effects of market volatilities on Playtika Holding and Lululemon Athletica 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 Playtika Holding with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtika Holding and Lululemon Athletica.

Diversification Opportunities for Playtika Holding and Lululemon Athletica

0.03

Correlation Coefficient

Playtika Holding  Lululemon Athletica

Significant diversification

The 3 months correlation between Playtika and Lululemon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Playtika Holding Corp and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Playtika Holding 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 Playtika Holding Corp are associated (or correlated) with Lululemon Athletica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lululemon Athletica has no effect on the direction of Playtika Holding i.e., Playtika Holding and Lululemon Athletica go up and down completely randomly.

Pair Corralation between Playtika Holding and Lululemon Athletica

Given the investment horizon of 90 days Playtika Holding Corp is expected to under-perform the Lululemon Athletica. But the stock apears to be less risky and, when comparing its historical volatility, Playtika Holding Corp is 1.83 times less risky than Lululemon Athletica. The stock trades about -0.5 of its potential returns per unit of risk. The Lululemon Athletica is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  32,672  in Lululemon Athletica on September 26, 2024 and sell it today you would earn a total of  5,677  from holding Lululemon Athletica or generate 17.38% return on investment over 90 days.

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

Playtika Holding Corp  vs.  Lululemon Athletica

Playtika Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtika Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Playtika Holding and Lululemon Athletica

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

The idea behind Playtika Holding Corp and Lululemon Athletica 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.