Correlation Between Lululemon Athletica and Playtika Holding

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

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

Diversification Opportunities for Lululemon Athletica and Playtika Holding

0.62

Correlation Coefficient

Lululemon Athletica  Playtika Holding

Poor diversification

The 3 months correlation between Lululemon and Playtika is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Playtika Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtika Holding Corp 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 Playtika Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtika Holding Corp has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Playtika Holding go up and down completely randomly.

Pair Corralation between Lululemon Athletica and Playtika Holding

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.9 times more return on investment than Playtika Holding. However, Lululemon Athletica is 1.11 times less risky than Playtika Holding. It trades about 0.03 of its potential returns per unit of risk. Playtika Holding Corp is currently generating about 0.01 per unit of risk. If you would invest  31,504  in Lululemon Athletica on September 15, 2024 and sell it today you would earn a total of  7,659  from holding Lululemon Athletica or generate 24.31% return on investment over 90 days.

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

Lululemon Athletica  vs.  Playtika Holding Corp

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.

Playtika Holding Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playtika Holding Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Playtika Holding is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lululemon Athletica and Playtika Holding

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

The idea behind Lululemon Athletica and Playtika Holding Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.