Correlation Between Lululemon Athletica and NEXT Plc
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and NEXT Plc 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 Lululemon Athletica and NEXT Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and NEXT plc, you can compare the effects of market volatilities on Lululemon Athletica and NEXT Plc 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 Lululemon Athletica with a short position of NEXT Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and NEXT Plc.
Diversification Opportunities for Lululemon Athletica and NEXT Plc
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lululemon and NEXT is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and Lululemon Athletica 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 Lululemon Athletica are associated (or correlated) with NEXT Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXT plc has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and NEXT Plc go up and down completely randomly.
Pair Corralation between Lululemon Athletica and NEXT Plc
Assuming the 90 days horizon Lululemon Athletica is expected to generate 1.21 times more return on investment than NEXT Plc. However, Lululemon Athletica is 1.21 times more volatile than NEXT plc. It trades about 0.14 of its potential returns per unit of risk. NEXT plc is currently generating about 0.02 per unit of risk. If you would invest 36,730 in Lululemon Athletica on November 2, 2024 and sell it today you would earn a total of 2,470 from holding Lululemon Athletica or generate 6.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. NEXT plc
Performance |
| Timeline |
| Lululemon Athletica |
| NEXT plc |
Lululemon Athletica and NEXT Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and NEXT Plc
The main advantage of trading using opposite Lululemon Athletica and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, NEXT Plc 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 NEXT Plc will offset losses from the drop in NEXT Plc's long position.| Lululemon Athletica vs. ALERION CLEANPOWER | Lululemon Athletica vs. Commercial Vehicle Group | Lululemon Athletica vs. Grupo Carso SAB | Lululemon Athletica vs. SEI INVESTMENTS |
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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 Stocks Directory module to find actively traded stocks across global markets.
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