Correlation Between Lulus Fashion and AKA Brands

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

By analyzing existing cross correlation between Lulus Fashion Lounge and AKA Brands Holding, you can compare the effects of market volatilities on Lulus Fashion and AKA Brands 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 Lulus Fashion with a short position of AKA Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lulus Fashion and AKA Brands.

Diversification Opportunities for Lulus Fashion and AKA Brands

0.15

Correlation Coefficient

Lulus Fashion  AKA Brands

Average diversification

The 3 months correlation between Lulus and AKA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lulus Fashion Lounge and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding and Lulus Fashion 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 Lulus Fashion Lounge are associated (or correlated) with AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Lulus Fashion i.e., Lulus Fashion and AKA Brands go up and down completely randomly.

Pair Corralation between Lulus Fashion and AKA Brands

Given the investment horizon of 90 days Lulus Fashion is expected to generate 25.95 times less return on investment than AKA Brands. In addition to that, Lulus Fashion is 1.73 times more volatile than AKA Brands Holding. It trades about 0.0 of its total potential returns per unit of risk. AKA Brands Holding is currently generating about 0.02 per unit of volatility. If you would invest  2,380  in AKA Brands Holding on September 5, 2024 and sell it today you would lose (24.00) from holding AKA Brands Holding or give up 1.01% of portfolio value over 90 days.

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

Lulus Fashion Lounge  vs.  AKA Brands Holding

Lulus Fashion Lounge

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lulus Fashion Lounge are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Lulus Fashion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AKA Brands Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AKA Brands Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward-looking signals, AKA Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lulus Fashion and AKA Brands

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

The idea behind Lulus Fashion Lounge and AKA Brands Holding 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.