Correlation Between Lululemon Athletica and GMS
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and GMS 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 GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and GMS Inc, you can compare the effects of market volatilities on Lululemon Athletica and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and GMS.
Diversification Opportunities for Lululemon Athletica and GMS
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lululemon and GMS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and GMS go up and down completely randomly.
Pair Corralation between Lululemon Athletica and GMS
Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the GMS. In addition to that, Lululemon Athletica is 1.34 times more volatile than GMS Inc. It trades about -0.03 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.03 per unit of volatility. If you would invest 8,212 in GMS Inc on September 14, 2024 and sell it today you would earn a total of 879.50 from holding GMS Inc or generate 10.71% 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. GMS Inc
Performance |
| Timeline |
| Lululemon Athletica |
| GMS Inc |
Lululemon Athletica and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and GMS
The main advantage of trading using opposite Lululemon Athletica and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| Lululemon Athletica vs. Digital Brands Group | Lululemon Athletica vs. Data Storage | Lululemon Athletica vs. Auddia Inc | Lululemon Athletica vs. DatChat Series A |
| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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