Correlation Between Lululemon Athletica and Vertiv Holdings
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Vertiv Holdings 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 Vertiv Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Vertiv Holdings Co, you can compare the effects of market volatilities on Lululemon Athletica and Vertiv Holdings 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 Vertiv Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Vertiv Holdings.
Diversification Opportunities for Lululemon Athletica and Vertiv Holdings
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lululemon and Vertiv is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Vertiv Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertiv Holdings 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 Vertiv Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertiv Holdings has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Vertiv Holdings go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Vertiv Holdings
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 5.85 times less return on investment than Vertiv Holdings. But when comparing it to its historical volatility, Lululemon Athletica is 1.68 times less risky than Vertiv Holdings. It trades about 0.04 of its potential returns per unit of risk. Vertiv Holdings Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,519 in Vertiv Holdings Co on November 2, 2024 and sell it today you would earn a total of 9,941 from holding Vertiv Holdings Co or generate 654.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Vertiv Holdings Co
Performance |
| Timeline |
| Lululemon Athletica |
| Vertiv Holdings |
Lululemon Athletica and Vertiv Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Vertiv Holdings
The main advantage of trading using opposite Lululemon Athletica and Vertiv Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Vertiv Holdings 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 Vertiv Holdings will offset losses from the drop in Vertiv Holdings' long position.| Lululemon Athletica vs. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
| Vertiv Holdings vs. nVent Electric PLC | Vertiv Holdings vs. Hubbell | Vertiv Holdings vs. Advanced Energy Industries | Vertiv Holdings vs. Energizer Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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