Correlation Between Lululemon Athletica and Funko

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

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

Diversification Opportunities for Lululemon Athletica and Funko

-0.23

Correlation Coefficient

Lululemon Athletica  Funko

Very good diversification

The 3 months correlation between Lululemon and Funko is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc 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 Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Funko go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Funko

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.13 times more return on investment than Funko. However, Lululemon Athletica is 1.13 times more volatile than Funko Inc. It trades about 0.22 of its potential returns per unit of risk. Funko Inc is currently generating about 0.04 per unit of risk. If you would invest  26,530  in Lululemon Athletica on September 15, 2024 and sell it today you would earn a total of  12,633  from holding Lululemon Athletica or generate 47.62% return on investment over 90 days.

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

Lululemon Athletica  vs.  Funko Inc

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 unfluctuating essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Funko Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Funko may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lululemon Athletica and Funko

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

The idea behind Lululemon Athletica and Funko Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.