Correlation Between Lucid and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Lucid 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 Lucid and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucid Group and Lululemon Athletica, you can compare the effects of market volatilities on Lucid 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 Lucid with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and Lululemon Athletica.
Diversification Opportunities for Lucid and Lululemon Athletica
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lucid and Lululemon is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Lucid 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 Lucid 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 Lucid i.e., Lucid and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Lucid and Lululemon Athletica
Given the investment horizon of 90 days Lucid Group is expected to under-perform the Lululemon Athletica. In addition to that, Lucid is 2.27 times more volatile than Lululemon Athletica. It trades about -0.04 of its total potential returns per unit of risk. Lululemon Athletica is currently generating about -0.06 per unit of volatility. If you would invest 50,274 in Lululemon Athletica on September 4, 2024 and sell it today you would lose (16,834) from holding Lululemon Athletica or give up 33.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Lucid Group vs. Lululemon Athletica
Performance |
| Timeline |
| Lucid Group |
| Lululemon Athletica |
Lucid and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucid and Lululemon Athletica
The main advantage of trading using opposite Lucid and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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.The idea behind Lucid Group and Lululemon Athletica pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Under Armour A | Lululemon Athletica vs. Columbia Sportswear |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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