Correlation Between Lululemon Athletica and Abacus Life

Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Abacus Life 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 Lululemon Athletica and Abacus Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lululemon Athletica and Abacus Life, you can compare the effects of market volatilities on Lululemon Athletica and Abacus Life 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 Lululemon Athletica with a short position of Abacus Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Abacus Life.

Diversification Opportunities for Lululemon Athletica and Abacus Life

-0.84

Correlation Coefficient

Lululemon Athletica  Abacus Life

Pay attention - limited upside

The 3 months correlation between Lululemon and Abacus is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life and Lululemon Athletica 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 Lululemon Athletica are associated (or correlated) with Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Abacus Life go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Abacus Life

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.97 times more return on investment than Abacus Life. However, Lululemon Athletica is 1.04 times less risky than Abacus Life. It trades about 0.22 of its potential returns per unit of risk. Abacus Life is currently generating about -0.15 per unit of risk. If you would invest  25,974  in Lululemon Athletica on September 25, 2024 and sell it today you would earn a total of  12,375  from holding Lululemon Athletica or generate 47.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lululemon Athletica  vs.  Abacus Life

Lululemon Athletica

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Abacus Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abacus Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lululemon Athletica and Abacus Life

The main advantage of trading using opposite Lululemon Athletica and Abacus Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Abacus Life 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 Abacus Life will offset losses from the drop in Abacus Life's long position.

The idea behind Lululemon Athletica and Abacus Life 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.