Correlation Between Lululemon Athletica and Boot Barn
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Boot Barn 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 Boot Barn into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Boot Barn Holdings, you can compare the effects of market volatilities on Lululemon Athletica and Boot Barn 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 Boot Barn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Boot Barn.
Diversification Opportunities for Lululemon Athletica and Boot Barn
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lululemon and Boot is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Boot Barn Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boot Barn Holdings 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 Boot Barn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boot Barn Holdings has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Boot Barn go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Boot Barn
Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the Boot Barn. But the stock apears to be less risky and, when comparing its historical volatility, Lululemon Athletica is 1.29 times less risky than Boot Barn. The stock trades about -0.01 of its potential returns per unit of risk. The Boot Barn Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,554 in Boot Barn Holdings on August 26, 2024 and sell it today you would earn a total of 7,151 from holding Boot Barn Holdings or generate 109.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Boot Barn Holdings
Performance |
| Timeline |
| Lululemon Athletica |
| Boot Barn Holdings |
Lululemon Athletica and Boot Barn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Boot Barn
The main advantage of trading using opposite Lululemon Athletica and Boot Barn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Boot Barn 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 Boot Barn will offset losses from the drop in Boot Barn's long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| Boot Barn vs. Ross Stores | Boot Barn vs. Childrens Place | Boot Barn vs. Buckle Inc | Boot Barn vs. Guess 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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