Correlation Between Lulus Fashion and Allbirds

Can any of the company-specific risk be diversified away by investing in both Lulus Fashion and Allbirds 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 Allbirds 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 Allbirds, you can compare the effects of market volatilities on Lulus Fashion and Allbirds 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 Allbirds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lulus Fashion and Allbirds.

Diversification Opportunities for Lulus Fashion and Allbirds

0.18

Correlation Coefficient

Lulus Fashion  Allbirds

Average diversification

The 3 months correlation between Lulus and Allbirds is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lulus Fashion Lounge and Allbirds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allbirds 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 Allbirds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allbirds has no effect on the direction of Lulus Fashion i.e., Lulus Fashion and Allbirds go up and down completely randomly.

Pair Corralation between Lulus Fashion and Allbirds

Given the investment horizon of 90 days Lulus Fashion Lounge is expected to generate 1.08 times more return on investment than Allbirds. However, Lulus Fashion is 1.08 times more volatile than Allbirds. It trades about 0.02 of its potential returns per unit of risk. Allbirds is currently generating about -0.07 per unit of risk. If you would invest  134.00  in Lulus Fashion Lounge on September 3, 2024 and sell it today you would lose (7.00) from holding Lulus Fashion Lounge or give up 5.22% 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.  Allbirds

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.

Allbirds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allbirds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lulus Fashion and Allbirds

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

The idea behind Lulus Fashion Lounge and Allbirds 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.