Correlation Between Ulta Beauty and OReilly Automotive
Can any of the company-specific risk be diversified away by investing in both Ulta Beauty and OReilly Automotive 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 Ulta Beauty and OReilly Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ulta Beauty and OReilly Automotive, you can compare the effects of market volatilities on Ulta Beauty and OReilly Automotive 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 Ulta Beauty with a short position of OReilly Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ulta Beauty and OReilly Automotive.
Diversification Opportunities for Ulta Beauty and OReilly Automotive
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ulta and OReilly is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive and Ulta Beauty 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 Ulta Beauty are associated (or correlated) with OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and OReilly Automotive go up and down completely randomly.
Pair Corralation between Ulta Beauty and OReilly Automotive
Assuming the 90 days horizon Ulta Beauty is expected to generate 3.26 times more return on investment than OReilly Automotive. However, Ulta Beauty is 3.26 times more volatile than OReilly Automotive. It trades about 0.31 of its potential returns per unit of risk. OReilly Automotive is currently generating about -0.05 per unit of risk. If you would invest 33,110 in Ulta Beauty on September 24, 2024 and sell it today you would earn a total of 7,400 from holding Ulta Beauty or generate 22.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ulta Beauty vs. OReilly Automotive
Performance |
| Timeline |
| Ulta Beauty |
| OReilly Automotive |
Ulta Beauty and OReilly Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ulta Beauty and OReilly Automotive
The main advantage of trading using opposite Ulta Beauty and OReilly Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, OReilly Automotive 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 OReilly Automotive will offset losses from the drop in OReilly Automotive's long position.| Ulta Beauty vs. MercadoLibre | Ulta Beauty vs. OReilly Automotive | Ulta Beauty vs. AutoZone | Ulta Beauty vs. Tractor Supply |
| OReilly Automotive vs. MercadoLibre | OReilly Automotive vs. AutoZone | OReilly Automotive vs. Tractor Supply | OReilly Automotive vs. Ulta Beauty |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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