Correlation Between Apple and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Lululemon Athletica, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Lululemon Athletica.
Diversification Opportunities for Apple and Lululemon Athletica
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Lululemon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Apple 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 Apple Inc 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 Apple i.e., Apple and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Apple and Lululemon Athletica
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.69 times more return on investment than Lululemon Athletica. However, Apple Inc is 1.46 times less risky than Lululemon Athletica. It trades about 0.17 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.07 per unit of risk. If you would invest 5,077 in Apple Inc on September 1, 2024 and sell it today you would earn a total of 2,043 from holding Apple Inc or generate 40.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Lululemon Athletica
Performance |
| Timeline |
| Apple Inc |
| Lululemon Athletica |
Apple and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Lululemon Athletica
The main advantage of trading using opposite Apple and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Brpr Corporate Offices | Apple vs. Ross Stores | Apple vs. NXP Semiconductors NV | Apple vs. Mangels Industrial SA |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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