Correlation Between IMPERIAL TOBACCO and Ulta Beauty
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Ulta Beauty, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Ulta Beauty.
Diversification Opportunities for IMPERIAL TOBACCO and Ulta Beauty
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMPERIAL and Ulta is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Ulta Beauty go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Ulta Beauty
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.44 times more return on investment than Ulta Beauty. However, IMPERIAL TOBACCO is 2.27 times less risky than Ulta Beauty. It trades about 0.25 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.1 per unit of risk. If you would invest 2,578 in IMPERIAL TOBACCO on September 23, 2024 and sell it today you would earn a total of 503.00 from holding IMPERIAL TOBACCO or generate 19.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
IMPERIAL TOBACCO vs. Ulta Beauty
Performance |
Timeline |
IMPERIAL TOBACCO |
Ulta Beauty |
IMPERIAL TOBACCO and Ulta Beauty Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IMPERIAL TOBACCO and Ulta Beauty
The main advantage of trading using opposite IMPERIAL TOBACCO and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.IMPERIAL TOBACCO vs. Mitsui Chemicals | IMPERIAL TOBACCO vs. Tyson Foods | IMPERIAL TOBACCO vs. GEELY AUTOMOBILE | IMPERIAL TOBACCO vs. CN MODERN DAIRY |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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