Correlation Between Lululemon Athletica and Kaltura

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

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

Diversification Opportunities for Lululemon Athletica and Kaltura

0.81

Correlation Coefficient

Lululemon Athletica  Kaltura

Very poor diversification

The 3 months correlation between Lululemon and Kaltura is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Kaltura in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaltura 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 Kaltura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaltura has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Kaltura go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Kaltura

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.51 times less return on investment than Kaltura. But when comparing it to its historical volatility, Lululemon Athletica is 1.62 times less risky than Kaltura. It trades about 0.21 of its potential returns per unit of risk. Kaltura is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Kaltura on September 23, 2024 and sell it today you would earn a total of  98.00  from holding Kaltura or generate 72.06% return on investment over 90 days.

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

Lululemon Athletica  vs.  Kaltura

Lululemon Athletica

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 16 (%) 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.

Kaltura

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kaltura are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Kaltura reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lululemon Athletica and Kaltura

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

The idea behind Lululemon Athletica and Kaltura 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.