Correlation Between Lululemon Athletica and Sea
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Sea 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 Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Sea, you can compare the effects of market volatilities on Lululemon Athletica and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Sea.
Diversification Opportunities for Lululemon Athletica and Sea
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lululemon and Sea is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Sea go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Sea
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 3.44 times less return on investment than Sea. But when comparing it to its historical volatility, Lululemon Athletica is 1.21 times less risky than Sea. It trades about 0.08 of its potential returns per unit of risk. Sea is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 9,926 in Sea on August 28, 2024 and sell it today you would earn a total of 1,467 from holding Sea or generate 14.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Sea
Performance |
| Timeline |
| Lululemon Athletica |
| Sea |
Lululemon Athletica and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Sea
The main advantage of trading using opposite Lululemon Athletica and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea'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 |
| Sea vs. Atari SA | Sea vs. Victory Square Technologies | Sea vs. Motorsport Gaming Us | Sea vs. Alpha Esports Tech |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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