Correlation Between Lululemon Athletica and Evolution Mining
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Evolution Mining 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 Evolution Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Evolution Mining, you can compare the effects of market volatilities on Lululemon Athletica and Evolution Mining 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 Evolution Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Evolution Mining.
Diversification Opportunities for Lululemon Athletica and Evolution Mining
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lululemon and Evolution is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Evolution Mining go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Evolution Mining
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.77 times more return on investment than Evolution Mining. However, Lululemon Athletica is 1.3 times less risky than Evolution Mining. It trades about 0.15 of its potential returns per unit of risk. Evolution Mining is currently generating about 0.02 per unit of risk. If you would invest 29,790 in Lululemon Athletica on September 1, 2024 and sell it today you would earn a total of 2,276 from holding Lululemon Athletica or generate 7.64% 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. Evolution Mining
Performance |
| Timeline |
| Lululemon Athletica |
| Evolution Mining |
Lululemon Athletica and Evolution Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Evolution Mining
The main advantage of trading using opposite Lululemon Athletica and Evolution Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Evolution Mining 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 Evolution Mining will offset losses from the drop in Evolution Mining's long position.| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Columbia Sportswear | Lululemon Athletica vs. Oxford Industries |
| Evolution Mining vs. Regis Resources | Evolution Mining vs. West African Resources | Evolution Mining vs. Allegiant Gold | Evolution Mining vs. Minaurum Gold |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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