Correlation Between Build A and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Build A 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 Build A and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Build A Bear Workshop and Ulta Beauty, you can compare the effects of market volatilities on Build A 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 Build A with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Build A and Ulta Beauty.
Diversification Opportunities for Build A and Ulta Beauty
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Build and Ulta is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Build A 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 Build A Bear Workshop 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 Build A i.e., Build A and Ulta Beauty go up and down completely randomly.
Pair Corralation between Build A and Ulta Beauty
Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 1.21 times more return on investment than Ulta Beauty. However, Build A is 1.21 times more volatile than Ulta Beauty. It trades about 0.08 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.01 per unit of risk. If you would invest 2,450 in Build A Bear Workshop on September 1, 2024 and sell it today you would earn a total of 1,349 from holding Build A Bear Workshop or generate 55.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Build A Bear Workshop vs. Ulta Beauty
Performance |
| Timeline |
| Build A Bear |
| Ulta Beauty |
Build A and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Build A and Ulta Beauty
The main advantage of trading using opposite Build A and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A 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.The idea behind Build A Bear Workshop and Ulta Beauty pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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