Correlation Between Vestis and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Vestis 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 Vestis and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestis and Lululemon Athletica, you can compare the effects of market volatilities on Vestis 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 Vestis with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestis and Lululemon Athletica.
Diversification Opportunities for Vestis and Lululemon Athletica
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vestis and Lululemon is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vestis and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Vestis 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 Vestis 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 Vestis i.e., Vestis and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Vestis and Lululemon Athletica
Given the investment horizon of 90 days Vestis is expected to generate 1.79 times more return on investment than Lululemon Athletica. However, Vestis is 1.79 times more volatile than Lululemon Athletica. It trades about 0.01 of its potential returns per unit of risk. Lululemon Athletica is currently generating about -0.01 per unit of risk. If you would invest 1,908 in Vestis on August 30, 2024 and sell it today you would lose (290.00) from holding Vestis or give up 15.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.13% |
| Values | Daily Returns |
Vestis vs. Lululemon Athletica
Performance |
| Timeline |
| Vestis |
| Lululemon Athletica |
Vestis and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestis and Lululemon Athletica
The main advantage of trading using opposite Vestis and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestis 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 Vestis 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. American Eagle Outfitters | Lululemon Athletica vs. Abercrombie Fitch | Lululemon Athletica vs. Urban Outfitters | Lululemon Athletica vs. Foot Locker |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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