Correlation Between BECTON and Lululemon Athletica

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

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

Diversification Opportunities for BECTON and Lululemon Athletica

-0.82

Correlation Coefficient

BECTON  Lululemon Athletica

Pay attention - limited upside

The 3 months correlation between BECTON and Lululemon is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding BECTON DICKINSON AND and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and BECTON 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 BECTON DICKINSON AND 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 BECTON i.e., BECTON and Lululemon Athletica go up and down completely randomly.

Pair Corralation between BECTON and Lululemon Athletica

Assuming the 90 days trading horizon BECTON DICKINSON AND is expected to under-perform the Lululemon Athletica. But the bond apears to be less risky and, when comparing its historical volatility, BECTON DICKINSON AND is 6.68 times less risky than Lululemon Athletica. The bond trades about -0.2 of its potential returns per unit of risk. The Lululemon Athletica is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  26,530  in Lululemon Athletica on September 15, 2024 and sell it today you would earn a total of  12,633  from holding Lululemon Athletica or generate 47.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

BECTON DICKINSON AND  vs.  Lululemon Athletica

BECTON DICKINSON AND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BECTON DICKINSON AND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BECTON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lululemon Athletica

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 17 (%) 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 BECTON and Lululemon Athletica

The main advantage of trading using opposite BECTON and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BECTON 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 BECTON DICKINSON AND 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.