Correlation Between 191216CU2 and Lululemon Athletica

Can any of the company-specific risk be diversified away by investing in both 191216CU2 and Lululemon Athletica 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 191216CU2 and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COCA COLA CO and Lululemon Athletica, you can compare the effects of market volatilities on 191216CU2 and Lululemon Athletica 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 191216CU2 with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of 191216CU2 and Lululemon Athletica.

Diversification Opportunities for 191216CU2 and Lululemon Athletica

-0.77

Correlation Coefficient

191216CU2  Lululemon Athletica

Pay attention - limited upside

The 3 months correlation between 191216CU2 and Lululemon is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding COCA COLA CO and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and 191216CU2 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 COCA COLA CO are associated (or correlated) with Lululemon Athletica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lululemon Athletica has no effect on the direction of 191216CU2 i.e., 191216CU2 and Lululemon Athletica go up and down completely randomly.

Pair Corralation between 191216CU2 and Lululemon Athletica

Assuming the 90 days trading horizon 191216CU2 is expected to generate 13.57 times less return on investment than Lululemon Athletica. But when comparing it to its historical volatility, COCA COLA CO is 5.34 times less risky than Lululemon Athletica. It trades about 0.01 of its potential returns per unit of risk. Lululemon Athletica is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  32,593  in Lululemon Athletica on September 26, 2024 and sell it today you would earn a total of  5,976  from holding Lululemon Athletica or generate 18.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

COCA COLA CO  vs.  Lululemon Athletica

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216CU2 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with 191216CU2 and Lululemon Athletica

The main advantage of trading using opposite 191216CU2 and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 191216CU2 position performs unexpectedly, Lululemon Athletica 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 Lululemon Athletica will offset losses from the drop in Lululemon Athletica's long position.

The idea behind COCA COLA CO and Lululemon Athletica 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.