Correlation Between Lululemon Athletica and Sphere Entertainment
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Sphere Entertainment 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 Sphere Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Sphere Entertainment Co, you can compare the effects of market volatilities on Lululemon Athletica and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Sphere Entertainment.
Diversification Opportunities for Lululemon Athletica and Sphere Entertainment
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lululemon and Sphere is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Sphere Entertainment go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Sphere Entertainment
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 1.13 times more return on investment than Sphere Entertainment. However, Lululemon Athletica is 1.13 times more volatile than Sphere Entertainment Co. It trades about 0.21 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.07 per unit of risk. If you would invest 26,882 in Lululemon Athletica on September 26, 2024 and sell it today you would earn a total of 11,467 from holding Lululemon Athletica or generate 42.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lululemon Athletica vs. Sphere Entertainment Co
Performance |
Timeline |
Lululemon Athletica |
Sphere Entertainment |
Lululemon Athletica and Sphere Entertainment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lululemon Athletica and Sphere Entertainment
The main advantage of trading using opposite Lululemon Athletica and Sphere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Sphere Entertainment 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 Sphere Entertainment will offset losses from the drop in Sphere Entertainment's long position.Lululemon Athletica vs. Amer Sports, | Lululemon Athletica vs. Brunswick | Lululemon Athletica vs. BRP Inc | Lululemon Athletica vs. Vision Marine Technologies |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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