Correlation Between Urban Outfitters and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Urban Outfitters 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 Urban Outfitters and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Urban Outfitters and Lululemon Athletica, you can compare the effects of market volatilities on Urban Outfitters 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 Urban Outfitters with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Outfitters and Lululemon Athletica.
Diversification Opportunities for Urban Outfitters and Lululemon Athletica
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Urban and Lululemon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Urban Outfitters and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Urban Outfitters 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 Urban Outfitters 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 Urban Outfitters i.e., Urban Outfitters and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Urban Outfitters and Lululemon Athletica
Given the investment horizon of 90 days Urban Outfitters is expected to generate 0.67 times more return on investment than Lululemon Athletica. However, Urban Outfitters is 1.49 times less risky than Lululemon Athletica. It trades about 0.17 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.07 per unit of risk. If you would invest 3,681 in Urban Outfitters on August 27, 2024 and sell it today you would earn a total of 217.00 from holding Urban Outfitters or generate 5.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Urban Outfitters vs. Lululemon Athletica
Performance |
| Timeline |
| Urban Outfitters |
| Lululemon Athletica |
Urban Outfitters and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Urban Outfitters and Lululemon Athletica
The main advantage of trading using opposite Urban Outfitters and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Outfitters 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.| Urban Outfitters vs. American Eagle Outfitters | Urban Outfitters vs. Foot Locker | Urban Outfitters vs. Childrens Place | Urban Outfitters vs. Abercrombie Fitch |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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