Correlation Between Lululemon Athletica and KB Home
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and KB Home 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 KB Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and KB Home, you can compare the effects of market volatilities on Lululemon Athletica and KB Home 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 KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and KB Home.
Diversification Opportunities for Lululemon Athletica and KB Home
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lululemon and KBH is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home 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 KB Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Home has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and KB Home go up and down completely randomly.
Pair Corralation between Lululemon Athletica and KB Home
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.88 times less return on investment than KB Home. In addition to that, Lululemon Athletica is 1.1 times more volatile than KB Home. It trades about 0.07 of its total potential returns per unit of risk. KB Home is currently generating about 0.14 per unit of volatility. If you would invest 7,975 in KB Home on August 27, 2024 and sell it today you would earn a total of 528.00 from holding KB Home or generate 6.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. KB Home
Performance |
| Timeline |
| Lululemon Athletica |
| KB Home |
Lululemon Athletica and KB Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and KB Home
The main advantage of trading using opposite Lululemon Athletica and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, KB Home 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 KB Home will offset losses from the drop in KB Home's long position.| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Under Armour A | Lululemon Athletica vs. Oxford Industries |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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