Correlation Between Ulta Beauty and Verizon Communications

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Ulta Beauty and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ulta Beauty and Verizon Communications, you can compare the effects of market volatilities on Ulta Beauty and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ulta Beauty and Verizon Communications.

Diversification Opportunities for Ulta Beauty and Verizon Communications

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ulta and Verizon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Verizon Communications go up and down completely randomly.

Pair Corralation between Ulta Beauty and Verizon Communications

Given the investment horizon of 90 days Ulta Beauty is expected to under-perform the Verizon Communications. In addition to that, Ulta Beauty is 2.78 times more volatile than Verizon Communications. It trades about -0.22 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.06 per unit of volatility. If you would invest  4,365  in Verizon Communications on July 22, 2024 and sell it today you would earn a total of  34.00  from holding Verizon Communications or generate 0.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ulta Beauty  vs.  Verizon Communications

 Performance 
       Timeline  
Ulta Beauty 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ulta Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ulta Beauty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Verizon Communications 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verizon Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Ulta Beauty and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ulta Beauty and Verizon Communications

The main advantage of trading using opposite Ulta Beauty and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.
The idea behind Ulta Beauty and Verizon Communications 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

Other Complementary Tools

Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum