Correlation Between Bath Body and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Bath Body 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 Bath Body and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bath Body Works and Ulta Beauty, you can compare the effects of market volatilities on Bath Body 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 Bath Body with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bath Body and Ulta Beauty.
Diversification Opportunities for Bath Body and Ulta Beauty
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bath and Ulta is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bath Body Works and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Bath Body 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 Bath Body Works 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 Bath Body i.e., Bath Body and Ulta Beauty go up and down completely randomly.
Pair Corralation between Bath Body and Ulta Beauty
Assuming the 90 days trading horizon Bath Body Works is expected to generate 0.98 times more return on investment than Ulta Beauty. However, Bath Body Works is 1.02 times less risky than Ulta Beauty. It trades about 0.36 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.2 per unit of risk. If you would invest 4,512 in Bath Body Works on September 14, 2024 and sell it today you would earn a total of 1,387 from holding Bath Body Works or generate 30.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bath Body Works vs. Ulta Beauty
Performance |
| Timeline |
| Bath Body Works |
| Ulta Beauty |
Bath Body and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bath Body and Ulta Beauty
The main advantage of trading using opposite Bath Body and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bath Body 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.| Bath Body vs. Mliuz SA | Bath Body vs. Natura Co Holding | Bath Body vs. Rede DOr So | Bath Body vs. Locaweb Servios de |
| Ulta Beauty vs. Mliuz SA | Ulta Beauty vs. Natura Co Holding | Ulta Beauty vs. Rede DOr So | Ulta Beauty vs. Locaweb Servios de |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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