Correlation Between Ulta Beauty and Academy Sports
Can any of the company-specific risk be diversified away by investing in both Ulta Beauty and Academy Sports 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 Ulta Beauty and Academy Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ulta Beauty and Academy Sports Outdoors, you can compare the effects of market volatilities on Ulta Beauty and Academy Sports 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 Ulta Beauty with a short position of Academy Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ulta Beauty and Academy Sports.
Diversification Opportunities for Ulta Beauty and Academy Sports
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ulta and Academy is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Academy Sports Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdoors and Ulta Beauty 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 Ulta Beauty are associated (or correlated) with Academy Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academy Sports Outdoors has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Academy Sports go up and down completely randomly.
Pair Corralation between Ulta Beauty and Academy Sports
Given the investment horizon of 90 days Ulta Beauty is expected to generate 1.03 times more return on investment than Academy Sports. However, Ulta Beauty is 1.03 times more volatile than Academy Sports Outdoors. It trades about -0.19 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about -0.34 per unit of risk. If you would invest 36,718 in Ulta Beauty on August 25, 2024 and sell it today you would lose (2,880) from holding Ulta Beauty or give up 7.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ulta Beauty vs. Academy Sports Outdoors
Performance |
| Timeline |
| Ulta Beauty |
| Academy Sports Outdoors |
Ulta Beauty and Academy Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ulta Beauty and Academy Sports
The main advantage of trading using opposite Ulta Beauty and Academy Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, Academy Sports 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 Academy Sports will offset losses from the drop in Academy Sports' long position.| Ulta Beauty vs. Williams Sonoma | Ulta Beauty vs. Dicks Sporting Goods | Ulta Beauty vs. Best Buy Co | Ulta Beauty vs. AutoZone |
| Academy Sports vs. Williams Sonoma | Academy Sports vs. AutoZone | Academy Sports vs. Ulta Beauty | Academy Sports vs. Best Buy Co |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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