Correlation Between Lululemon Athletica and TMT Acquisition
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and TMT Acquisition 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 TMT Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and TMT Acquisition Corp, you can compare the effects of market volatilities on Lululemon Athletica and TMT Acquisition 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 TMT Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and TMT Acquisition.
Diversification Opportunities for Lululemon Athletica and TMT Acquisition
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lululemon and TMT is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and TMT Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Acquisition Corp 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 TMT Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Acquisition Corp has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and TMT Acquisition go up and down completely randomly.
Pair Corralation between Lululemon Athletica and TMT Acquisition
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 23.01 times less return on investment than TMT Acquisition. But when comparing it to its historical volatility, Lululemon Athletica is 5.09 times less risky than TMT Acquisition. It trades about 0.02 of its potential returns per unit of risk. TMT Acquisition Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 25.00 in TMT Acquisition Corp on September 12, 2024 and sell it today you would earn a total of 13.00 from holding TMT Acquisition Corp or generate 52.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 52.27% |
| Values | Daily Returns |
Lululemon Athletica vs. TMT Acquisition Corp
Performance |
| Timeline |
| Lululemon Athletica |
| TMT Acquisition Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Lululemon Athletica and TMT Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and TMT Acquisition
The main advantage of trading using opposite Lululemon Athletica and TMT Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, TMT Acquisition 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 TMT Acquisition will offset losses from the drop in TMT Acquisition's long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| TMT Acquisition vs. Citi Trends | TMT Acquisition vs. Zumiez Inc | TMT Acquisition vs. Figs Inc | TMT Acquisition vs. Lululemon Athletica |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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