Correlation Between Lululemon Athletica and VF
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and VF 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 VF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and VF Corporation, you can compare the effects of market volatilities on Lululemon Athletica and VF 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 VF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and VF.
Diversification Opportunities for Lululemon Athletica and VF
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lululemon and VF is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation 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 VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and VF go up and down completely randomly.
Pair Corralation between Lululemon Athletica and VF
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 5.13 times less return on investment than VF. But when comparing it to its historical volatility, Lululemon Athletica is 2.47 times less risky than VF. It trades about 0.08 of its potential returns per unit of risk. VF Corporation is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,703 in VF Corporation on August 29, 2024 and sell it today you would earn a total of 340.00 from holding VF Corporation or generate 19.96% 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. VF Corp.
Performance |
| Timeline |
| Lululemon Athletica |
| VF Corporation |
Lululemon Athletica and VF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and VF
The main advantage of trading using opposite Lululemon Athletica and VF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, VF 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 VF will offset losses from the drop in VF'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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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