Correlation Between Pet Acquisition and Ulta Beauty

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

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

Diversification Opportunities for Pet Acquisition and Ulta Beauty

0.26

Correlation Coefficient

Pet Acquisition  Ulta Beauty

Modest diversification

The 3 months correlation between Pet and Ulta is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pet Acquisition LLC and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Pet Acquisition 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 Pet Acquisition LLC 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 Pet Acquisition i.e., Pet Acquisition and Ulta Beauty go up and down completely randomly.

Pair Corralation between Pet Acquisition and Ulta Beauty

Given the investment horizon of 90 days Pet Acquisition LLC is expected to generate 3.28 times more return on investment than Ulta Beauty. However, Pet Acquisition is 3.28 times more volatile than Ulta Beauty. It trades about 0.1 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.06 per unit of risk. If you would invest  319.00  in Pet Acquisition LLC on August 30, 2024 and sell it today you would earn a total of  111.00  from holding Pet Acquisition LLC or generate 34.8% return on investment over 90 days.

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

Pet Acquisition LLC  vs.  Ulta Beauty

Pet Acquisition LLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pet Acquisition LLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Pet Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Ulta Beauty

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Ulta Beauty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Pet Acquisition and Ulta Beauty

The main advantage of trading using opposite Pet Acquisition and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pet Acquisition 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 Pet Acquisition LLC 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.