Correlation Between Alcoa Corp and Lululemon Athletica
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Lululemon Athletica, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Lululemon Athletica.
Diversification Opportunities for Alcoa Corp and Lululemon Athletica
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alcoa and Lululemon is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Lululemon Athletica go up and down completely randomly.
Pair Corralation between Alcoa Corp and Lululemon Athletica
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.63 times more return on investment than Lululemon Athletica. However, Alcoa Corp is 1.59 times less risky than Lululemon Athletica. It trades about 0.26 of its potential returns per unit of risk. Lululemon Athletica is currently generating about -0.36 per unit of risk. If you would invest 3,135 in Alcoa Corp on January 20, 2024 and sell it today you would earn a total of 412.00 from holding Alcoa Corp or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Lululemon Athletica
Performance |
| Timeline |
| Alcoa Corp |
| Lululemon Athletica |
Alcoa Corp and Lululemon Athletica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Lululemon Athletica
The main advantage of trading using opposite Alcoa Corp and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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.| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
| Lululemon Athletica vs. Brunswick | Lululemon Athletica vs. BRP Inc | Lululemon Athletica vs. VOXX International | Lululemon Athletica vs. Vizio Holding Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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