Correlation Between U1566PAD7 and Lululemon Athletica

Can any of the company-specific risk be diversified away by investing in both U1566PAD7 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 U1566PAD7 and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LUMN 45 15 JAN 29 and Lululemon Athletica, you can compare the effects of market volatilities on U1566PAD7 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 U1566PAD7 with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of U1566PAD7 and Lululemon Athletica.

Diversification Opportunities for U1566PAD7 and Lululemon Athletica

0.8

Correlation Coefficient

U1566PAD7  Lululemon Athletica

Very poor diversification

The 3 months correlation between U1566PAD7 and Lululemon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding LUMN 45 15 JAN 29 and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and U1566PAD7 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 LUMN 45 15 JAN 29 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 U1566PAD7 i.e., U1566PAD7 and Lululemon Athletica go up and down completely randomly.

Pair Corralation between U1566PAD7 and Lululemon Athletica

Assuming the 90 days trading horizon LUMN 45 15 JAN 29 is expected to under-perform the Lululemon Athletica. In addition to that, U1566PAD7 is 1.85 times more volatile than Lululemon Athletica. It trades about -0.31 of its total potential returns per unit of risk. Lululemon Athletica is currently generating about 0.22 per unit of volatility. If you would invest  32,672  in Lululemon Athletica on September 25, 2024 and sell it today you would earn a total of  5,897  from holding Lululemon Athletica or generate 18.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	42.86%
Values	Daily Returns

LUMN 45 15 JAN 29  vs.  Lululemon Athletica

LUMN 45 15

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LUMN 45 15 JAN 29 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, U1566PAD7 is not utilizing all of its potentials. The recent 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 uncertain essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U1566PAD7 and Lululemon Athletica

The main advantage of trading using opposite U1566PAD7 and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U1566PAD7 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 LUMN 45 15 JAN 29 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.