Correlation Between Lululemon Athletica and BCE
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and BCE 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 BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and BCE Inc, you can compare the effects of market volatilities on Lululemon Athletica and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and BCE.
Diversification Opportunities for Lululemon Athletica and BCE
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lululemon and BCE is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and BCE go up and down completely randomly.
Pair Corralation between Lululemon Athletica and BCE
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.19 times more return on investment than BCE. However, Lululemon Athletica is 1.19 times more volatile than BCE Inc. It trades about 0.1 of its potential returns per unit of risk. BCE Inc is currently generating about -0.36 per unit of risk. If you would invest 30,385 in Lululemon Athletica on August 31, 2024 and sell it today you would earn a total of 1,567 from holding Lululemon Athletica or generate 5.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. BCE Inc
Performance |
| Timeline |
| Lululemon Athletica |
| BCE Inc |
Lululemon Athletica and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and BCE
The main advantage of trading using opposite Lululemon Athletica and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| BCE vs. RLJ Lodging Trust | BCE vs. Aquagold International | BCE vs. Stepstone Group | BCE vs. Morningstar Unconstrained Allocation |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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