Correlation Between Ulta Beauty and Genuine Parts

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

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

Diversification Opportunities for Ulta Beauty and Genuine Parts

-0.01

Correlation Coefficient

Ulta Beauty  Genuine Parts

Good diversification

The 3 months correlation between Ulta and Genuine is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Genuine Parts go up and down completely randomly.

Pair Corralation between Ulta Beauty and Genuine Parts

Given the investment horizon of 90 days Ulta Beauty is expected to generate 0.76 times more return on investment than Genuine Parts. However, Ulta Beauty is 1.32 times less risky than Genuine Parts. It trades about 0.14 of its potential returns per unit of risk. Genuine Parts Co is currently generating about -0.07 per unit of risk. If you would invest  32,131  in Ulta Beauty on August 7, 2024 and sell it today you would earn a total of  6,259  from holding Ulta Beauty or generate 19.48% 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.  Genuine Parts Co

Ulta Beauty

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 10 (%) 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.

Genuine Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ulta Beauty and Genuine Parts

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

The idea behind Ulta Beauty and Genuine Parts Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.