Correlation Between Lululemon Athletica and Industria
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Industria 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 Industria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Industria de Diseo, you can compare the effects of market volatilities on Lululemon Athletica and Industria 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 Industria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Industria.
Diversification Opportunities for Lululemon Athletica and Industria
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lululemon and Industria is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Industria de Diseo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseo 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 Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseo has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Industria go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Industria
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.27 times more return on investment than Industria. However, Lululemon Athletica is 1.27 times more volatile than Industria de Diseo. It trades about 0.09 of its potential returns per unit of risk. Industria de Diseo is currently generating about -0.01 per unit of risk. If you would invest 30,482 in Lululemon Athletica on August 30, 2024 and sell it today you would earn a total of 1,470 from holding Lululemon Athletica or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Industria de Diseo
Performance |
| Timeline |
| Lululemon Athletica |
| Industria de Diseo |
Lululemon Athletica and Industria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Industria
The main advantage of trading using opposite Lululemon Athletica and Industria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Industria 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 Industria will offset losses from the drop in Industria's long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| Industria vs. Fast Retailing Co | Industria vs. The TJX Companies | Industria vs. Ross Stores | Industria vs. Urban Outfitters |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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