Correlation Between China Resources and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Ulta Beauty, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Ulta Beauty.
Diversification Opportunities for China Resources and Ulta Beauty
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Ulta is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Ulta Beauty go up and down completely randomly.
Pair Corralation between China Resources and Ulta Beauty
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Ulta Beauty. In addition to that, China Resources is 1.27 times more volatile than Ulta Beauty. It trades about -0.23 of its total potential returns per unit of risk. Ulta Beauty is currently generating about -0.05 per unit of volatility. If you would invest 40,260 in Ulta Beauty on October 16, 2024 and sell it today you would lose (660.00) from holding Ulta Beauty or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Ulta Beauty
Performance |
| Timeline |
| China Resources Beer |
| Ulta Beauty |
China Resources and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Ulta Beauty
The main advantage of trading using opposite China Resources and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. Strategic Education | China Resources vs. Shenandoah Telecommunications | China Resources vs. Charter Communications | China Resources vs. GMO Internet |
| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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