Correlation Between Lululemon Athletica and Veralto
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Veralto 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 Veralto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Veralto, you can compare the effects of market volatilities on Lululemon Athletica and Veralto 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 Veralto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Veralto.
Diversification Opportunities for Lululemon Athletica and Veralto
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lululemon and Veralto is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto 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 Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Veralto go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Veralto
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 2.71 times more return on investment than Veralto. However, Lululemon Athletica is 2.71 times more volatile than Veralto. It trades about 0.07 of its potential returns per unit of risk. Veralto is currently generating about 0.18 per unit of risk. If you would invest 30,754 in Lululemon Athletica on August 29, 2024 and sell it today you would earn a total of 1,130 from holding Lululemon Athletica or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Veralto
Performance |
| Timeline |
| Lululemon Athletica |
| Veralto |
Lululemon Athletica and Veralto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Veralto
The main advantage of trading using opposite Lululemon Athletica and Veralto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Veralto 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 Veralto will offset losses from the drop in Veralto's long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| Veralto vs. Victorias Secret Co | Veralto vs. Lululemon Athletica | Veralto vs. Tandy Leather Factory | Veralto vs. Nextplat 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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