Correlation Between CROWN and Lululemon Athletica

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

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

Diversification Opportunities for CROWN and Lululemon Athletica

0.03

Correlation Coefficient

CROWN  Lululemon Athletica

Significant diversification

The 3 months correlation between CROWN and Lululemon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CROWN CASTLE INTERNATIONAL and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and CROWN 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 CROWN CASTLE INTERNATIONAL 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 CROWN i.e., CROWN and Lululemon Athletica go up and down completely randomly.

Pair Corralation between CROWN and Lululemon Athletica

Assuming the 90 days trading horizon CROWN CASTLE INTERNATIONAL is expected to under-perform the Lululemon Athletica. But the bond apears to be less risky and, when comparing its historical volatility, CROWN CASTLE INTERNATIONAL is 6.11 times less risky than Lululemon Athletica. The bond trades about -0.07 of its potential returns per unit of risk. The Lululemon Athletica is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  31,314  in Lululemon Athletica on October 7, 2024 and sell it today you would earn a total of  6,504  from holding Lululemon Athletica or generate 20.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.12%
Values	Daily Returns

CROWN CASTLE INTERNATIONAL  vs.  Lululemon Athletica

CROWN CASTLE INTERNA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lululemon Athletica

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 15 (%) 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 CROWN and Lululemon Athletica

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

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.