Correlation Between Lululemon Athletica and Mini Dow
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Mini Dow 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 Mini Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Mini Dow Jones, you can compare the effects of market volatilities on Lululemon Athletica and Mini Dow 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 Mini Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Mini Dow.
Diversification Opportunities for Lululemon Athletica and Mini Dow
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lululemon and Mini is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Mini Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mini Dow Jones 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 Mini Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mini Dow Jones has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Mini Dow go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Mini Dow
Given the investment horizon of 90 days Lululemon Athletica is expected to under-perform the Mini Dow. In addition to that, Lululemon Athletica is 3.07 times more volatile than Mini Dow Jones. It trades about -0.01 of its total potential returns per unit of risk. Mini Dow Jones is currently generating about 0.08 per unit of volatility. If you would invest 3,398,600 in Mini Dow Jones on August 25, 2024 and sell it today you would earn a total of 1,043,100 from holding Mini Dow Jones or generate 30.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.26% |
| Values | Daily Returns |
Lululemon Athletica vs. Mini Dow Jones
Performance |
| Timeline |
| Lululemon Athletica |
| Mini Dow Jones |
Lululemon Athletica and Mini Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Mini Dow
The main advantage of trading using opposite Lululemon Athletica and Mini Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Mini Dow 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 Mini Dow will offset losses from the drop in Mini Dow'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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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