Correlation Between Alaska Air and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Alaska Air 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 Alaska Air and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and Lululemon Athletica, you can compare the effects of market volatilities on Alaska Air 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 Alaska Air with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Lululemon Athletica.
Diversification Opportunities for Alaska Air and Lululemon Athletica
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alaska and Lululemon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Alaska Air 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 Alaska Air 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 Alaska Air i.e., Alaska Air and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Alaska Air and Lululemon Athletica
Considering the 90-day investment horizon Alaska Air Group is expected to generate 1.03 times more return on investment than Lululemon Athletica. However, Alaska Air is 1.03 times more volatile than Lululemon Athletica. It trades about 0.02 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.0 per unit of risk. If you would invest 4,865 in Alaska Air Group on August 31, 2024 and sell it today you would earn a total of 395.00 from holding Alaska Air Group or generate 8.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Lululemon Athletica
Performance |
| Timeline |
| Alaska Air Group |
| Lululemon Athletica |
Alaska Air and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Lululemon Athletica
The main advantage of trading using opposite Alaska Air and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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.| Alaska Air vs. JetBlue Airways Corp | Alaska Air vs. Allegiant Travel | Alaska Air vs. SkyWest | Alaska Air vs. Air Transport Services |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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