Correlation Between Five Below and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Five Below and Ulta Beauty 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 Five Below and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Below and Ulta Beauty, you can compare the effects of market volatilities on Five Below and Ulta Beauty 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 Five Below with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Below and Ulta Beauty.
Diversification Opportunities for Five Below and Ulta Beauty
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Five and Ulta is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Five Below and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Five Below 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 Five Below are associated (or correlated) with Ulta Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ulta Beauty has no effect on the direction of Five Below i.e., Five Below and Ulta Beauty go up and down completely randomly.
Pair Corralation between Five Below and Ulta Beauty
Assuming the 90 days horizon Five Below is expected to under-perform the Ulta Beauty. In addition to that, Five Below is 1.22 times more volatile than Ulta Beauty. It trades about -0.04 of its total potential returns per unit of risk. Ulta Beauty is currently generating about 0.03 per unit of volatility. If you would invest 35,200 in Ulta Beauty on October 16, 2024 and sell it today you would earn a total of 4,400 from holding Ulta Beauty or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.68% |
| Values | Daily Returns |
Five Below vs. Ulta Beauty
Performance |
| Timeline |
| Five Below |
| Ulta Beauty |
Five Below and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Below and Ulta Beauty
The main advantage of trading using opposite Five Below and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Below position performs unexpectedly, Ulta Beauty 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 Ulta Beauty will offset losses from the drop in Ulta Beauty's long position.| Five Below vs. InterContinental Hotels Group | Five Below vs. MIRAMAR HOTEL INV | Five Below vs. AEGEAN AIRLINES | Five Below vs. SOUTHWEST AIRLINES |
| Ulta Beauty vs. Tractor Supply | Ulta Beauty vs. Genuine Parts | Ulta Beauty vs. Best Buy Co | Ulta Beauty vs. Five Below |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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