Correlation Between Nippon Light and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both Nippon Light 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 Nippon Light and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Light Metal and Ulta Beauty, you can compare the effects of market volatilities on Nippon Light 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 Nippon Light with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Light and Ulta Beauty.
Diversification Opportunities for Nippon Light and Ulta Beauty
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nippon and Ulta is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Nippon Light 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 Nippon Light Metal 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 Nippon Light i.e., Nippon Light and Ulta Beauty go up and down completely randomly.
Pair Corralation between Nippon Light and Ulta Beauty
Assuming the 90 days horizon Nippon Light Metal is expected to under-perform the Ulta Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Light Metal is 1.55 times less risky than Ulta Beauty. The stock trades about -0.04 of its potential returns per unit of risk. The Ulta Beauty is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 44,200 in Ulta Beauty on October 20, 2024 and sell it today you would lose (4,720) from holding Ulta Beauty or give up 10.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Light Metal vs. Ulta Beauty
Performance |
| Timeline |
| Nippon Light Metal |
| Ulta Beauty |
Nippon Light and Ulta Beauty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Light and Ulta Beauty
The main advantage of trading using opposite Nippon Light and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Light 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.| Nippon Light vs. Choice Hotels International | Nippon Light vs. Virtu Financial | Nippon Light vs. Sunstone Hotel Investors | Nippon Light vs. InterContinental Hotels Group |
| Ulta Beauty vs. Nippon Light Metal | Ulta Beauty vs. Singapore Telecommunications Limited | Ulta Beauty vs. Entravision Communications | Ulta Beauty vs. DAIDO METAL TD |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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