Correlation Between FormFactor and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both FormFactor 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 FormFactor and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FormFactor and Lululemon Athletica, you can compare the effects of market volatilities on FormFactor 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 FormFactor with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormFactor and Lululemon Athletica.
Diversification Opportunities for FormFactor and Lululemon Athletica
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FormFactor and Lululemon is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and FormFactor 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 FormFactor 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 FormFactor i.e., FormFactor and Lululemon Athletica go up and down completely randomly.
Pair Corralation between FormFactor and Lululemon Athletica
Given the investment horizon of 90 days FormFactor is expected to under-perform the Lululemon Athletica. In addition to that, FormFactor is 1.59 times more volatile than Lululemon Athletica. It trades about -0.03 of its total potential returns per unit of risk. Lululemon Athletica is currently generating about 0.18 per unit of volatility. If you would invest 29,314 in Lululemon Athletica on August 24, 2024 and sell it today you would earn a total of 3,034 from holding Lululemon Athletica or generate 10.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
FormFactor vs. Lululemon Athletica
Performance |
| Timeline |
| FormFactor |
| Lululemon Athletica |
FormFactor and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FormFactor and Lululemon Athletica
The main advantage of trading using opposite FormFactor and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor 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.| FormFactor vs. Eshallgo Class A | FormFactor vs. Amtech Systems | FormFactor vs. Gold Fields Ltd | FormFactor vs. Aegean Airlines SA |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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