Correlation Between Lululemon Athletica and Destination
Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and Destination 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 Destination into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and Destination XL Group, you can compare the effects of market volatilities on Lululemon Athletica and Destination 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 Destination. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and Destination.
Diversification Opportunities for Lululemon Athletica and Destination
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lululemon and Destination is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and Destination XL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destination XL Group 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 Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destination XL Group has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and Destination go up and down completely randomly.
Pair Corralation between Lululemon Athletica and Destination
Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.78 times more return on investment than Destination. However, Lululemon Athletica is 1.28 times less risky than Destination. It trades about 0.01 of its potential returns per unit of risk. Destination XL Group is currently generating about -0.01 per unit of risk. If you would invest 36,084 in Lululemon Athletica on January 20, 2024 and sell it today you would lose (837.00) from holding Lululemon Athletica or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lululemon Athletica vs. Destination XL Group
Performance |
| Timeline |
| Lululemon Athletica |
| Destination XL Group |
Lululemon Athletica and Destination Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lululemon Athletica and Destination
The main advantage of trading using opposite Lululemon Athletica and Destination positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, Destination 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 Destination will offset losses from the drop in Destination's long position.| Lululemon Athletica vs. Brunswick | Lululemon Athletica vs. BRP Inc | Lululemon Athletica vs. VOXX International | Lululemon Athletica vs. Vizio Holding Corp |
| Destination vs. Cato Corporation | Destination vs. Zumiez Inc | Destination vs. Tillys Inc | Destination vs. Duluth Holdings |
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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