Correlation Between Lululemon Athletica and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Emerson Radio 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 Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Emerson Radio, you can compare the effects of market volatilities on Lululemon Athletica and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Emerson Radio.
Diversification Opportunities for Lululemon Athletica and Emerson Radio
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lululemon and Emerson is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Emerson Radio go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Emerson Radio
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.8 times more return on investment than Emerson Radio. However, Lululemon Athletica is 1.25 times less risky than Emerson Radio. It trades about 0.15 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.3 per unit of risk. If you would invest 29,790 in Lululemon Athletica on September 1, 2024 and sell it today you would earn a total of 2,276 from holding Lululemon Athletica or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Emerson Radio
Performance |
| Timeline |
| Lululemon Athletica |
| Emerson Radio |
Lululemon Athletica and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Emerson Radio
The main advantage of trading using opposite Lululemon Athletica and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Columbia Sportswear | Lululemon Athletica vs. Oxford Industries |
| Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Vizio Holding Corp | Emerson Radio vs. Turtle Beach Corp |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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