Correlation Between Ross Stores and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Ross Stores 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 Ross Stores and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Lululemon Athletica, you can compare the effects of market volatilities on Ross Stores 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 Ross Stores with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Lululemon Athletica.
Diversification Opportunities for Ross Stores and Lululemon Athletica
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ross and Lululemon is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Ross Stores and Lululemon Athletica
Given the investment horizon of 90 days Ross Stores is expected to generate 0.62 times more return on investment than Lululemon Athletica. However, Ross Stores is 1.6 times less risky than Lululemon Athletica. It trades about 0.31 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.09 per unit of risk. If you would invest 13,901 in Ross Stores on August 30, 2024 and sell it today you would earn a total of 1,588 from holding Ross Stores or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. Lululemon Athletica
Performance |
| Timeline |
| Ross Stores |
| Lululemon Athletica |
Ross Stores and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Lululemon Athletica
The main advantage of trading using opposite Ross Stores and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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.| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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