Correlation Between Bread Financial and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Bread Financial 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 Bread Financial and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Ulta Beauty, you can compare the effects of market volatilities on Bread Financial 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 Bread Financial with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Ulta Beauty.
Diversification Opportunities for Bread Financial and Ulta Beauty
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bread and Ulta is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Bread Financial 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and Ulta Beauty go up and down completely randomly.
Pair Corralation between Bread Financial and Ulta Beauty
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.42 times more return on investment than Ulta Beauty. However, Bread Financial is 1.42 times more volatile than Ulta Beauty. It trades about 0.06 of its potential returns per unit of risk. Ulta Beauty is currently generating about -0.01 per unit of risk. If you would invest 3,989 in Bread Financial Holdings on December 4, 2024 and sell it today you would earn a total of 3,876 from holding Bread Financial Holdings or generate 97.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.9% |
| Values | Daily Returns |
Bread Financial Holdings vs. Ulta Beauty
Performance |
| Timeline |
| Bread Financial Holdings |
| Ulta Beauty |
Bread Financial and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Ulta Beauty
The main advantage of trading using opposite Bread Financial and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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.| Bread Financial vs. Metalrgica Riosulense SA | Bread Financial vs. Credit Acceptance | Bread Financial vs. Discover Financial Services | Bread Financial vs. G2D Investments |
| Ulta Beauty vs. DENTSPLY SIRONA | Ulta Beauty vs. SSC Technologies Holdings, | Ulta Beauty vs. Broadridge Financial Solutions, | Ulta Beauty vs. JB Hunt Transport |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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