Correlation Between Ulta Beauty and JD Sports

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Can any of the company-specific risk be diversified away by investing in both Ulta Beauty and JD 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 JD 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 JD Sports Fashion, you can compare the effects of market volatilities on Ulta Beauty and JD 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ulta Beauty and JD Sports.

Diversification Opportunities for Ulta Beauty and JD Sports

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ulta and JDDSF is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and JD Sports go up and down completely randomly.

Pair Corralation between Ulta Beauty and JD Sports

If you would invest  36,265  in Ulta Beauty on September 26, 2024 and sell it today you would earn a total of  6,649  from holding Ulta Beauty or generate 18.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ulta Beauty  vs.  JD Sports Fashion

 Performance 
       Timeline  
Ulta Beauty 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
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 January 2025.
JD Sports Fashion 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ulta Beauty and JD Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ulta Beauty and JD Sports

The main advantage of trading using opposite Ulta Beauty and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, JD 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 JD Sports will offset losses from the drop in JD Sports' long position.
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The idea behind Ulta Beauty and JD Sports Fashion 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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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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