Correlation Between Avis Budget and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Avis Budget 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 Avis Budget and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avis Budget Group and Lululemon Athletica, you can compare the effects of market volatilities on Avis Budget 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 Avis Budget with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Lululemon Athletica.
Diversification Opportunities for Avis Budget and Lululemon Athletica
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avis and Lululemon is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Avis Budget 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 Avis Budget 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 Avis Budget i.e., Avis Budget and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Avis Budget and Lululemon Athletica
Considering the 90-day investment horizon Avis Budget Group is expected to generate 1.54 times more return on investment than Lululemon Athletica. However, Avis Budget is 1.54 times more volatile than Lululemon Athletica. It trades about 0.34 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.15 per unit of risk. If you would invest 8,300 in Avis Budget Group on September 1, 2024 and sell it today you would earn a total of 2,607 from holding Avis Budget Group or generate 31.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. Lululemon Athletica
Performance |
| Timeline |
| Avis Budget Group |
| Lululemon Athletica |
Avis Budget and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Lululemon Athletica
The main advantage of trading using opposite Avis Budget and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget 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.| Avis Budget vs. Hertz Global Hldgs | Avis Budget vs. Ryder System | Avis Budget vs. HE Equipment Services | Avis Budget vs. United Rentals |
| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Columbia Sportswear | Lululemon Athletica vs. Oxford Industries |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |