Correlation Between Locaweb Servios and Ulta Beauty

Can any of the company-specific risk be diversified away by investing in both Locaweb Servios 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 Locaweb Servios and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Locaweb Servios de and Ulta Beauty, you can compare the effects of market volatilities on Locaweb Servios 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 Locaweb Servios with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locaweb Servios and Ulta Beauty.

Diversification Opportunities for Locaweb Servios and Ulta Beauty

-0.75

Correlation Coefficient

Locaweb Servios  Ulta Beauty

Pay attention - limited upside

The 3 months correlation between Locaweb and Ulta is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Locaweb Servios de and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Locaweb Servios 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 Locaweb Servios de 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 Locaweb Servios i.e., Locaweb Servios and Ulta Beauty go up and down completely randomly.

Pair Corralation between Locaweb Servios and Ulta Beauty

Assuming the 90 days trading horizon Locaweb Servios de is expected to under-perform the Ulta Beauty. In addition to that, Locaweb Servios is 1.15 times more volatile than Ulta Beauty. It trades about -0.22 of its total potential returns per unit of risk. Ulta Beauty is currently generating about 0.41 per unit of volatility. If you would invest  9,960  in Ulta Beauty on September 20, 2024 and sell it today you would earn a total of  3,080  from holding Ulta Beauty or generate 30.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Locaweb Servios de  vs.  Ulta Beauty

Locaweb Servios de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Locaweb Servios de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ulta Beauty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Ulta Beauty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Locaweb Servios and Ulta Beauty

The main advantage of trading using opposite Locaweb Servios and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Locaweb Servios 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 Locaweb Servios de 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.