Correlation Between Dow Jones and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Lululemon Athletica, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lululemon Athletica.
Diversification Opportunities for Dow Jones and Lululemon Athletica
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Lululemon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Dow Jones and Lululemon Athletica
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than Lululemon Athletica. However, Dow Jones Industrial is 3.17 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 -0.02 per unit of risk. If you would invest 4,290,695 in Dow Jones Industrial on October 23, 2024 and sell it today you would earn a total of 111,886 from holding Dow Jones Industrial or generate 2.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lululemon Athletica
Performance |
| Timeline |
Dow Jones and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lululemon Athletica
Pair trading matchups for Lululemon Athletica
Pair Trading with Dow Jones and Lululemon Athletica
The main advantage of trading using opposite Dow Jones and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. NiSource | Dow Jones vs. Kinetik Holdings | Dow Jones vs. Empresa Distribuidora y |
| Lululemon Athletica vs. DETALION GAMES SA | Lululemon Athletica vs. Penn National Gaming | Lululemon Athletica vs. Boyd Gaming | Lululemon Athletica vs. PENN NATL GAMING |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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