Correlation Between Lululemon Athletica and Century Communities
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Century Communities 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 Century Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Century Communities, you can compare the effects of market volatilities on Lululemon Athletica and Century Communities 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 Century Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Century Communities.
Diversification Opportunities for Lululemon Athletica and Century Communities
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lululemon and Century is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Century Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Communities 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 Century Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Communities has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Century Communities go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Century Communities
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.25 times less return on investment than Century Communities. But when comparing it to its historical volatility, Lululemon Athletica is 1.01 times less risky than Century Communities. It trades about 0.03 of its potential returns per unit of risk. Century Communities is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,853 in Century Communities on November 19, 2024 and sell it today you would earn a total of 1,615 from holding Century Communities or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Century Communities
Performance |
| Timeline |
| Lululemon Athletica |
| Century Communities |
Lululemon Athletica and Century Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Century Communities
The main advantage of trading using opposite Lululemon Athletica and Century Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Century Communities 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 Century Communities will offset losses from the drop in Century Communities' long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| Century Communities vs. Taylor Morn Home | Century Communities vs. Beazer Homes USA | Century Communities vs. Meritage | Century Communities vs. TRI Pointe Homes |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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