Correlation Between Western Sierra and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Western Sierra 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 Western Sierra and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Sierra Mining and Lululemon Athletica, you can compare the effects of market volatilities on Western Sierra 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 Western Sierra with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and Lululemon Athletica.
Diversification Opportunities for Western Sierra and Lululemon Athletica
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and Lululemon is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Western Sierra 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 Western Sierra Mining 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 Western Sierra i.e., Western Sierra and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Western Sierra and Lululemon Athletica
Given the investment horizon of 90 days Western Sierra Mining is expected to generate 46.17 times more return on investment than Lululemon Athletica. However, Western Sierra is 46.17 times more volatile than Lululemon Athletica. It trades about 0.1 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.0 per unit of risk. If you would invest 9.80 in Western Sierra Mining on August 29, 2024 and sell it today you would lose (9.12) from holding Western Sierra Mining or give up 93.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Sierra Mining vs. Lululemon Athletica
Performance |
| Timeline |
| Western Sierra Mining |
| Lululemon Athletica |
Western Sierra and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and Lululemon Athletica
The main advantage of trading using opposite Western Sierra and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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.| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Rimrock Gold Corp | Western Sierra vs. Galexxy Holdings |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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