Correlation Between Revolve Group and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Revolve Group 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 Revolve Group and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Revolve Group LLC and Lululemon Athletica, you can compare the effects of market volatilities on Revolve Group 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 Revolve Group with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolve Group and Lululemon Athletica.
Diversification Opportunities for Revolve Group and Lululemon Athletica
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Revolve and Lululemon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Revolve Group LLC and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Revolve Group 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 Revolve Group LLC 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 Revolve Group i.e., Revolve Group and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Revolve Group and Lululemon Athletica
Given the investment horizon of 90 days Revolve Group LLC is expected to generate 2.13 times more return on investment than Lululemon Athletica. However, Revolve Group is 2.13 times more volatile than Lululemon Athletica. It trades about 0.14 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.04 per unit of risk. If you would invest 1,796 in Revolve Group LLC on September 5, 2024 and sell it today you would earn a total of 1,757 from holding Revolve Group LLC or generate 97.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Revolve Group LLC vs. Lululemon Athletica
Performance |
| Timeline |
| Revolve Group LLC |
| Lululemon Athletica |
Revolve Group and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Revolve Group and Lululemon Athletica
The main advantage of trading using opposite Revolve Group and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolve Group 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.| Revolve Group vs. Appian Corp | Revolve Group vs. Okta Inc | Revolve Group vs. MongoDB | Revolve Group vs. Twilio Inc |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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