Correlation Between AutoZone and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both AutoZone 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 AutoZone and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoZone and Ulta Beauty, you can compare the effects of market volatilities on AutoZone 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 AutoZone with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and Ulta Beauty.
Diversification Opportunities for AutoZone and Ulta Beauty
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AutoZone and Ulta is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and AutoZone 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 AutoZone 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 AutoZone i.e., AutoZone and Ulta Beauty go up and down completely randomly.
Pair Corralation between AutoZone and Ulta Beauty
Considering the 90-day investment horizon AutoZone is expected to generate 13.25 times less return on investment than Ulta Beauty. But when comparing it to its historical volatility, AutoZone is 1.76 times less risky than Ulta Beauty. It trades about 0.01 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 36,920 in Ulta Beauty on October 20, 2024 and sell it today you would earn a total of 3,581 from holding Ulta Beauty or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoZone vs. Ulta Beauty
Performance |
| Timeline |
| AutoZone |
| Ulta Beauty |
AutoZone and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoZone and Ulta Beauty
The main advantage of trading using opposite AutoZone and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone 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.| AutoZone vs. Advance Auto Parts | AutoZone vs. Tractor Supply | AutoZone vs. Genuine Parts Co | AutoZone vs. Five Below |
| Ulta Beauty vs. Williams Sonoma | Ulta Beauty vs. Dicks Sporting Goods | Ulta Beauty vs. Best Buy Co | Ulta Beauty vs. AutoZone |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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