Correlation Between Trade Desk and Ulta Beauty

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

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

Diversification Opportunities for Trade Desk and Ulta Beauty

0.63

Correlation Coefficient

Trade Desk  Ulta Beauty

Poor diversification

The 3 months correlation between Trade and Ulta is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Trade Desk 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 The Trade Desk 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 Trade Desk i.e., Trade Desk and Ulta Beauty go up and down completely randomly.

Pair Corralation between Trade Desk and Ulta Beauty

Assuming the 90 days trading horizon The Trade Desk is expected to generate 0.89 times more return on investment than Ulta Beauty. However, The Trade Desk is 1.12 times less risky than Ulta Beauty. It trades about 0.22 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.11 per unit of risk. If you would invest  588.00  in The Trade Desk on September 18, 2024 and sell it today you would earn a total of  213.00  from holding The Trade Desk or generate 36.22% return on investment over 90 days.

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

The Trade Desk  vs.  Ulta Beauty

Trade Desk

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trade Desk sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak essential indicators, Ulta Beauty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trade Desk and Ulta Beauty

The main advantage of trading using opposite Trade Desk and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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 The Trade Desk 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.