Correlation Between Leslies and Ulta Beauty

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Can any of the company-specific risk be diversified away by investing in both Leslies 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 Leslies and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leslies and Ulta Beauty, you can compare the effects of market volatilities on Leslies 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 Leslies with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leslies and Ulta Beauty.

Diversification Opportunities for Leslies and Ulta Beauty

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Leslies and Ulta is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Leslies and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Leslies 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 Leslies 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 Leslies i.e., Leslies and Ulta Beauty go up and down completely randomly.

Pair Corralation between Leslies and Ulta Beauty

Given the investment horizon of 90 days Leslies is expected to under-perform the Ulta Beauty. In addition to that, Leslies is 2.65 times more volatile than Ulta Beauty. It trades about -0.04 of its total potential returns per unit of risk. Ulta Beauty is currently generating about -0.02 per unit of volatility. If you would invest  47,601  in Ulta Beauty on November 9, 2024 and sell it today you would lose (7,441) from holding Ulta Beauty or give up 15.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Leslies  vs.  Ulta Beauty

 Performance 
       Timeline  
Leslies 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Leslies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Ulta Beauty 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Ulta Beauty may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Leslies and Ulta Beauty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Leslies and Ulta Beauty

The main advantage of trading using opposite Leslies and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leslies 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 Leslies 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.
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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