Correlation Between Ulta Beauty and Evgo

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

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

Diversification Opportunities for Ulta Beauty and Evgo

-0.32

Correlation Coefficient

Ulta Beauty  Evgo

Very good diversification

The 3 months correlation between Ulta and Evgo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Evgo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evgo Inc 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 Evgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evgo Inc has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Evgo go up and down completely randomly.

Pair Corralation between Ulta Beauty and Evgo

Given the investment horizon of 90 days Ulta Beauty is expected to generate 3.71 times less return on investment than Evgo. But when comparing it to its historical volatility, Ulta Beauty is 3.88 times less risky than Evgo. It trades about 0.11 of its potential returns per unit of risk. Evgo Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  442.00  in Evgo Inc on September 12, 2024 and sell it today you would earn a total of  205.00  from holding Evgo Inc or generate 46.38% return on investment over 90 days.

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

Ulta Beauty  vs.  Evgo Inc

Ulta Beauty

Risk-Adjusted Performance

8 of 100

Modest

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

Evgo Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evgo Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Evgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ulta Beauty and Evgo

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

The idea behind Ulta Beauty and Evgo Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.