Correlation Between Lululemon Athletica and Coupang LLC
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Coupang LLC 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 Coupang LLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Coupang LLC, you can compare the effects of market volatilities on Lululemon Athletica and Coupang LLC 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 Coupang LLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Coupang LLC.
Diversification Opportunities for Lululemon Athletica and Coupang LLC
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lululemon and Coupang is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Coupang LLC go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Coupang LLC
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 2.61 times less return on investment than Coupang LLC. But when comparing it to its historical volatility, Lululemon Athletica is 1.0 times less risky than Coupang LLC. It trades about 0.02 of its potential returns per unit of risk. Coupang LLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,274 in Coupang LLC on August 29, 2024 and sell it today you would earn a total of 273.00 from holding Coupang LLC or generate 12.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Coupang LLC
Performance |
| Timeline |
| Lululemon Athletica |
| Coupang LLC |
Lululemon Athletica and Coupang LLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Coupang LLC
The main advantage of trading using opposite Lululemon Athletica and Coupang LLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Coupang LLC 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 Coupang LLC will offset losses from the drop in Coupang LLC's long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
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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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