Correlation Between NGL Energy and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both NGL Energy and Lululemon Athletica 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 NGL Energy and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NGL Energy Partners and Lululemon Athletica, you can compare the effects of market volatilities on NGL Energy and Lululemon Athletica 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 NGL Energy with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and Lululemon Athletica.
Diversification Opportunities for NGL Energy and Lululemon Athletica
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NGL and Lululemon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and NGL Energy 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 NGL Energy Partners are associated (or correlated) with Lululemon Athletica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lululemon Athletica has no effect on the direction of NGL Energy i.e., NGL Energy and Lululemon Athletica go up and down completely randomly.
Pair Corralation between NGL Energy and Lululemon Athletica
Considering the 90-day investment horizon NGL Energy Partners is expected to generate 1.21 times more return on investment than Lululemon Athletica. However, NGL Energy is 1.21 times more volatile than Lululemon Athletica. It trades about 0.07 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.04 per unit of risk. If you would invest 268.00 in NGL Energy Partners on November 2, 2024 and sell it today you would earn a total of 288.00 from holding NGL Energy Partners or generate 107.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NGL Energy Partners vs. Lululemon Athletica
Performance |
| Timeline |
| NGL Energy Partners |
| Lululemon Athletica |
NGL Energy and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGL Energy and Lululemon Athletica
The main advantage of trading using opposite NGL Energy and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy position performs unexpectedly, Lululemon Athletica 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 Lululemon Athletica will offset losses from the drop in Lululemon Athletica's long position.| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. Kinetik Holdings |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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