Correlation Between Fast Retailing and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Lululemon Athletica, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Lululemon Athletica.
Diversification Opportunities for Fast Retailing and Lululemon Athletica
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and Lululemon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Fast Retailing and Lululemon Athletica
Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Lululemon Athletica. But the stock apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.16 times less risky than Lululemon Athletica. The stock trades about -0.13 of its potential returns per unit of risk. The Lululemon Athletica is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 36,730 in Lululemon Athletica on November 2, 2024 and sell it today you would earn a total of 2,470 from holding Lululemon Athletica or generate 6.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Lululemon Athletica
Performance |
| Timeline |
| Fast Retailing |
| Lululemon Athletica |
Fast Retailing and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Lululemon Athletica
The main advantage of trading using opposite Fast Retailing and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. The TJX Companies | Fast Retailing vs. Lululemon Athletica | Fast Retailing vs. Urban Outfitters | Fast Retailing vs. Superior Plus Corp |
| Lululemon Athletica vs. ALERION CLEANPOWER | Lululemon Athletica vs. Commercial Vehicle Group | Lululemon Athletica vs. Grupo Carso SAB | Lululemon Athletica vs. SEI INVESTMENTS |
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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