Correlation Between United Rentals and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both United Rentals 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 United Rentals and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Lululemon Athletica, you can compare the effects of market volatilities on United Rentals 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 United Rentals with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Lululemon Athletica.
Diversification Opportunities for United Rentals and Lululemon Athletica
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Lululemon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and United Rentals 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 United Rentals 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 United Rentals i.e., United Rentals and Lululemon Athletica go up and down completely randomly.
Pair Corralation between United Rentals and Lululemon Athletica
Assuming the 90 days trading horizon United Rentals is expected to generate 11.77 times less return on investment than Lululemon Athletica. But when comparing it to its historical volatility, United Rentals is 1.3 times less risky than Lululemon Athletica. It trades about 0.03 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 39,779 in Lululemon Athletica on September 13, 2024 and sell it today you would earn a total of 19,802 from holding Lululemon Athletica or generate 49.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.62% |
| Values | Daily Returns |
United Rentals vs. Lululemon Athletica
Performance |
| Timeline |
| United Rentals |
| Lululemon Athletica |
United Rentals and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Lululemon Athletica
The main advantage of trading using opposite United Rentals and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals 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.| United Rentals vs. Localiza Rent a | United Rentals vs. Movida Participaes SA | United Rentals vs. Fundo Investimento Imobiliario | United Rentals vs. LESTE FDO INV |
| Lululemon Athletica vs. Global X Funds | Lululemon Athletica vs. Fidelity National Information | Lululemon Athletica vs. Southwest Airlines Co | Lululemon Athletica vs. Nordon Indstrias Metalrgicas |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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