Correlation Between Tillys and Lululemon Athletica

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

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

Diversification Opportunities for Tillys and Lululemon Athletica

-0.61

Correlation Coefficient

Tillys  Lululemon Athletica

Excellent diversification

The 3 months correlation between Tillys and Lululemon is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tillys Inc and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Tillys 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 Tillys Inc 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 Tillys i.e., Tillys and Lululemon Athletica go up and down completely randomly.

Pair Corralation between Tillys and Lululemon Athletica

Given the investment horizon of 90 days Tillys Inc is expected to under-perform the Lululemon Athletica. In addition to that, Tillys is 1.37 times more volatile than Lululemon Athletica. It trades about -0.03 of its total potential returns per unit of risk. Lululemon Athletica is currently generating about 0.03 per unit of volatility. If you would invest  31,547  in Lululemon Athletica on October 4, 2024 and sell it today you would earn a total of  6,694  from holding Lululemon Athletica or generate 21.22% return on investment over 90 days.

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

Tillys Inc  vs.  Lululemon Athletica

Tillys Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tillys Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Tillys is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 unfluctuating essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tillys and Lululemon Athletica

The main advantage of trading using opposite Tillys and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tillys 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 Tillys Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.