Correlation Between Under Armour and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Under Armour 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 Under Armour and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Under Armour C and Lululemon Athletica, you can compare the effects of market volatilities on Under Armour 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 Under Armour with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Under Armour and Lululemon Athletica.
Diversification Opportunities for Under Armour and Lululemon Athletica
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Under and Lululemon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Under Armour 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 Under Armour C 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 Under Armour i.e., Under Armour and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Under Armour and Lululemon Athletica
Allowing for the 90-day total investment horizon Under Armour C is expected to generate 2.33 times more return on investment than Lululemon Athletica. However, Under Armour is 2.33 times more volatile than Lululemon Athletica. It trades about 0.11 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.15 per unit of risk. If you would invest 790.00 in Under Armour C on September 1, 2024 and sell it today you would earn a total of 87.00 from holding Under Armour C or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Under Armour C vs. Lululemon Athletica
Performance |
| Timeline |
| Under Armour C |
| Lululemon Athletica |
Under Armour and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Under Armour and Lululemon Athletica
The main advantage of trading using opposite Under Armour and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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.| Under Armour vs. Levi Strauss Co | Under Armour vs. Columbia Sportswear | Under Armour vs. Hanesbrands | Under Armour vs. PVH Corp |
| Lululemon Athletica vs. VF Corporation | Lululemon Athletica vs. Levi Strauss Co | Lululemon Athletica vs. Columbia Sportswear | 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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