Correlation Between Lululemon Athletica and BlackBerry

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Can any of the company-specific risk be diversified away by investing in both Lululemon Athletica and BlackBerry 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 BlackBerry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lululemon Athletica and BlackBerry, you can compare the effects of market volatilities on Lululemon Athletica and BlackBerry 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 BlackBerry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lululemon Athletica and BlackBerry.

Diversification Opportunities for Lululemon Athletica and BlackBerry

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lululemon and BlackBerry is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lululemon Athletica and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry 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 BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Lululemon Athletica i.e., Lululemon Athletica and BlackBerry go up and down completely randomly.

Pair Corralation between Lululemon Athletica and BlackBerry

Given the investment horizon of 90 days Lululemon Athletica is expected to generate 0.93 times more return on investment than BlackBerry. However, Lululemon Athletica is 1.08 times less risky than BlackBerry. It trades about 0.32 of its potential returns per unit of risk. BlackBerry is currently generating about 0.29 per unit of risk. If you would invest  32,557  in Lululemon Athletica on September 5, 2022 and sell it today you would earn a total of  6,042  from holding Lululemon Athletica or generate 18.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lululemon Athletica  vs.  BlackBerry

 Performance (%) 
       Timeline  
Lululemon Athletica 
Lululemon Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lululemon Price Channel

BlackBerry 
BlackBerry Performance
0 of 100
Over the last 90 days BlackBerry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BlackBerry is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BlackBerry Price Channel

Lululemon Athletica and BlackBerry Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lululemon Athletica and BlackBerry

The main advantage of trading using opposite Lululemon Athletica and BlackBerry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lululemon Athletica position performs unexpectedly, BlackBerry 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 BlackBerry will offset losses from the drop in BlackBerry's long position.
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The idea behind Lululemon Athletica and BlackBerry 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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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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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