Correlation Between Asbury Automotive and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Asbury Automotive 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 Asbury Automotive and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asbury Automotive Group and Lululemon Athletica, you can compare the effects of market volatilities on Asbury Automotive 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 Asbury Automotive with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and Lululemon Athletica.
Diversification Opportunities for Asbury Automotive and Lululemon Athletica
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asbury and Lululemon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Asbury Automotive 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 Asbury Automotive Group 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 Asbury Automotive i.e., Asbury Automotive and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Asbury Automotive and Lululemon Athletica
Considering the 90-day investment horizon Asbury Automotive Group is expected to generate 0.92 times more return on investment than Lululemon Athletica. However, Asbury Automotive Group is 1.09 times less risky than Lululemon Athletica. It trades about 0.23 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.18 per unit of risk. If you would invest 22,977 in Asbury Automotive Group on August 24, 2024 and sell it today you would earn a total of 2,839 from holding Asbury Automotive Group or generate 12.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asbury Automotive Group vs. Lululemon Athletica
Performance |
| Timeline |
| Asbury Automotive |
| Lululemon Athletica |
Asbury Automotive and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asbury Automotive and Lululemon Athletica
The main advantage of trading using opposite Asbury Automotive and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive 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 Asbury Automotive Group 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.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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