Correlation Between Genuine Parts and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Genuine Parts 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 Genuine Parts and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genuine Parts and Ulta Beauty, you can compare the effects of market volatilities on Genuine Parts 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 Genuine Parts with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Ulta Beauty.
Diversification Opportunities for Genuine Parts and Ulta Beauty
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Genuine and Ulta is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Genuine Parts 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 Genuine Parts 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 Genuine Parts i.e., Genuine Parts and Ulta Beauty go up and down completely randomly.
Pair Corralation between Genuine Parts and Ulta Beauty
Assuming the 90 days horizon Genuine Parts is expected to under-perform the Ulta Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Genuine Parts is 1.21 times less risky than Ulta Beauty. The stock trades about -0.03 of its potential returns per unit of risk. The Ulta Beauty is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 44,050 in Ulta Beauty on September 24, 2024 and sell it today you would lose (3,540) from holding Ulta Beauty or give up 8.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Genuine Parts vs. Ulta Beauty
Performance |
| Timeline |
| Genuine Parts |
| Ulta Beauty |
Genuine Parts and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genuine Parts and Ulta Beauty
The main advantage of trading using opposite Genuine Parts and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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.| Genuine Parts vs. MercadoLibre | Genuine Parts vs. OReilly Automotive | Genuine Parts vs. AutoZone | Genuine Parts vs. Tractor Supply |
| Ulta Beauty vs. MercadoLibre | Ulta Beauty vs. OReilly Automotive | Ulta Beauty vs. AutoZone | Ulta Beauty vs. Tractor Supply |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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