Correlation Between JD Sports and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both JD Sports 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 JD Sports and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Sports Fashion and Ulta Beauty, you can compare the effects of market volatilities on JD Sports 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 JD Sports with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and Ulta Beauty.
Diversification Opportunities for JD Sports and Ulta Beauty
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between JDSPY and Ulta is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and JD Sports 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 JD Sports Fashion 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 JD Sports i.e., JD Sports and Ulta Beauty go up and down completely randomly.
Pair Corralation between JD Sports and Ulta Beauty
Assuming the 90 days horizon JD Sports Fashion is expected to generate 2.25 times more return on investment than Ulta Beauty. However, JD Sports is 2.25 times more volatile than Ulta Beauty. It trades about 0.0 of its potential returns per unit of risk. Ulta Beauty is currently generating about -0.01 per unit of risk. If you would invest 196.00 in JD Sports Fashion on September 3, 2024 and sell it today you would lose (66.00) from holding JD Sports Fashion or give up 33.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Sports Fashion vs. Ulta Beauty
Performance |
| Timeline |
| JD Sports Fashion |
| Ulta Beauty |
JD Sports and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and Ulta Beauty
The main advantage of trading using opposite JD Sports and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports 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.| JD Sports vs. Burlington Stores | JD Sports vs. Childrens Place | JD Sports vs. Buckle Inc | JD Sports vs. Shoe Carnival |
| Ulta Beauty vs. Target | Ulta Beauty vs. Lowes Companies | Ulta Beauty vs. Kohls Corp | Ulta Beauty vs. Walmart |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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