Correlation Between Ulta Beauty and G2D Investments

Can any of the company-specific risk be diversified away by investing in both Ulta Beauty and G2D Investments 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 G2D Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ulta Beauty and G2D Investments, you can compare the effects of market volatilities on Ulta Beauty and G2D Investments 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 G2D Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ulta Beauty and G2D Investments.

Diversification Opportunities for Ulta Beauty and G2D Investments

-0.74

Correlation Coefficient

Ulta Beauty  G2D Investments

Pay attention - limited upside

The 3 months correlation between Ulta and G2D is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and G2D Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G2D Investments 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 G2D Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G2D Investments has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and G2D Investments go up and down completely randomly.

Pair Corralation between Ulta Beauty and G2D Investments

Assuming the 90 days trading horizon Ulta Beauty is expected to generate 0.92 times more return on investment than G2D Investments. However, Ulta Beauty is 1.09 times less risky than G2D Investments. It trades about 0.12 of its potential returns per unit of risk. G2D Investments is currently generating about -0.01 per unit of risk. If you would invest  10,355  in Ulta Beauty on September 28, 2024 and sell it today you would earn a total of  3,390  from holding Ulta Beauty or generate 32.74% return on investment over 90 days.

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

Ulta Beauty  vs.  G2D Investments

Ulta Beauty

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 13 (%) 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.

G2D Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G2D Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ulta Beauty and G2D Investments

The main advantage of trading using opposite Ulta Beauty and G2D Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, G2D Investments 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 G2D Investments will offset losses from the drop in G2D Investments' long position.

The idea behind Ulta Beauty and G2D Investments 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.