Correlation Between VOXX International and Lululemon Athletica

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

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

Diversification Opportunities for VOXX International and Lululemon Athletica

0.52

Correlation Coefficient

VOXX International  Lululemon Athletica

Very weak diversification

The 3 months correlation between VOXX and Lululemon is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding VOXX International and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and VOXX International 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 VOXX 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 VOXX International i.e., VOXX International and Lululemon Athletica go up and down completely randomly.

Pair Corralation between VOXX International and Lululemon Athletica

Given the investment horizon of 90 days VOXX International is expected to generate 1.24 times less return on investment than Lululemon Athletica. In addition to that, VOXX International is 2.35 times more volatile than Lululemon Athletica. It trades about 0.01 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  31,132  in Lululemon Athletica on September 28, 2024 and sell it today you would earn a total of  7,236  from holding Lululemon Athletica or generate 23.24% return on investment over 90 days.

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

VOXX International  vs.  Lululemon Athletica

VOXX International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VOXX International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, VOXX International showed solid returns over the last few months and may actually be approaching a breakup point.

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 VOXX International and Lululemon Athletica

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

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.