Correlation Between Lululemon Athletica and National CineMedia
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and National CineMedia 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 National CineMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and National CineMedia, you can compare the effects of market volatilities on Lululemon Athletica and National CineMedia 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 National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and National CineMedia.
Diversification Opportunities for Lululemon Athletica and National CineMedia
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lululemon and National is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and National CineMedia go up and down completely randomly.
Pair Corralation between Lululemon Athletica and National CineMedia
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 2.13 times more return on investment than National CineMedia. However, Lululemon Athletica is 2.13 times more volatile than National CineMedia. It trades about 0.31 of its potential returns per unit of risk. National CineMedia is currently generating about 0.08 per unit of risk. If you would invest 30,953 in Lululemon Athletica on September 19, 2024 and sell it today you would earn a total of 8,106 from holding Lululemon Athletica or generate 26.19% 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. National CineMedia
Performance |
| Timeline |
| Lululemon Athletica |
| National CineMedia |
Lululemon Athletica and National CineMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and National CineMedia
The main advantage of trading using opposite Lululemon Athletica and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, National CineMedia 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 National CineMedia will offset losses from the drop in National CineMedia'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 |
| National CineMedia vs. Mirriad Advertising plc | National CineMedia vs. INEO Tech Corp | National CineMedia vs. Kidoz Inc | National CineMedia vs. Snipp Interactive |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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