Correlation Between PT Bank and Ulta Beauty

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

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

Diversification Opportunities for PT Bank and Ulta Beauty

-0.52

Correlation Coefficient

PT Bank  Ulta Beauty

Excellent diversification

The 3 months correlation between PQ9 and Ulta is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and PT Bank 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 PT Bank Mandiri 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 PT Bank i.e., PT Bank and Ulta Beauty go up and down completely randomly.

Pair Corralation between PT Bank and Ulta Beauty

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Ulta Beauty. In addition to that, PT Bank is 1.8 times more volatile than Ulta Beauty. It trades about -0.06 of its total potential returns per unit of risk. Ulta Beauty is currently generating about 0.3 per unit of volatility. If you would invest  33,000  in Ulta Beauty on September 23, 2024 and sell it today you would earn a total of  7,510  from holding Ulta Beauty or generate 22.76% return on investment over 90 days.

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

PT Bank Mandiri  vs.  Ulta Beauty

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ulta Beauty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ulta Beauty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Ulta Beauty

The main advantage of trading using opposite PT Bank and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Mandiri 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.