Correlation Between Verra Mobility and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Verra Mobility 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 Verra Mobility and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verra Mobility Corp and Lululemon Athletica, you can compare the effects of market volatilities on Verra Mobility 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 Verra Mobility with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verra Mobility and Lululemon Athletica.
Diversification Opportunities for Verra Mobility and Lululemon Athletica
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Verra and Lululemon is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Verra Mobility 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 Verra Mobility Corp 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 Verra Mobility i.e., Verra Mobility and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Verra Mobility and Lululemon Athletica
Given the investment horizon of 90 days Verra Mobility Corp is expected to under-perform the Lululemon Athletica. But the stock apears to be less risky and, when comparing its historical volatility, Verra Mobility Corp is 1.19 times less risky than Lululemon Athletica. The stock trades about -0.04 of its potential returns per unit of risk. The Lululemon Athletica is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 30,662 in Lululemon Athletica on September 1, 2024 and sell it today you would earn a total of 1,404 from holding Lululemon Athletica or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verra Mobility Corp vs. Lululemon Athletica
Performance |
| Timeline |
| Verra Mobility Corp |
| Lululemon Athletica |
Verra Mobility and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verra Mobility and Lululemon Athletica
The main advantage of trading using opposite Verra Mobility and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verra Mobility 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.The idea behind Verra Mobility Corp and Lululemon Athletica pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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