Correlation Between Lululemon Athletica and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Asbury Automotive 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 Lululemon Athletica and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Asbury Automotive Group, you can compare the effects of market volatilities on Lululemon Athletica and Asbury Automotive 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 Lululemon Athletica with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Asbury Automotive.
Diversification Opportunities for Lululemon Athletica and Asbury Automotive
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lululemon and Asbury is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Lululemon Athletica 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 Lululemon Athletica are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Asbury Automotive go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Asbury Automotive
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 2.59 times less return on investment than Asbury Automotive. In addition to that, Lululemon Athletica is 1.12 times more volatile than Asbury Automotive Group. It trades about 0.12 of its total potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.35 per unit of volatility. If you would invest 22,558 in Asbury Automotive Group on August 28, 2024 and sell it today you would earn a total of 4,124 from holding Asbury Automotive Group or generate 18.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Asbury Automotive Group
Performance |
| Timeline |
| Lululemon Athletica |
| Asbury Automotive |
Lululemon Athletica and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Asbury Automotive
The main advantage of trading using opposite Lululemon Athletica and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Asbury Automotive 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 Asbury Automotive will offset losses from the drop in Asbury Automotive's long position.| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Under Armour A | Lululemon Athletica vs. Oxford Industries |
| Asbury Automotive vs. Kingsway Financial Services | Asbury Automotive vs. KAR Auction Services | Asbury Automotive vs. Cango Inc | Asbury Automotive vs. Vroom Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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