Correlation Between Industria and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Industria 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 Industria and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industria de Diseno and Lululemon Athletica, you can compare the effects of market volatilities on Industria 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 Industria with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industria and Lululemon Athletica.
Diversification Opportunities for Industria and Lululemon Athletica
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Industria and Lululemon is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Industria 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 Industria de Diseno 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 Industria i.e., Industria and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Industria and Lululemon Athletica
Assuming the 90 days trading horizon Industria is expected to generate 1.22 times less return on investment than Lululemon Athletica. But when comparing it to its historical volatility, Industria de Diseno is 1.55 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 0.14 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industria de Diseno vs. Lululemon Athletica
Performance |
| Timeline |
| Industria de Diseno |
| Lululemon Athletica |
Industria and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industria and Lululemon Athletica
The main advantage of trading using opposite Industria and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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.| Industria vs. USWE SPORTS AB | Industria vs. Playa Hotels Resorts | Industria vs. PLAY2CHILL SA ZY | Industria vs. China BlueChemical |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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