Correlation Between Prosafe SE and Ulta Beauty

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

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

Diversification Opportunities for Prosafe SE and Ulta Beauty

-0.65

Correlation Coefficient

Prosafe SE  Ulta Beauty

Excellent diversification

The 3 months correlation between Prosafe and Ulta is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prosafe SE and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Prosafe SE 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 Prosafe SE 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 Prosafe SE i.e., Prosafe SE and Ulta Beauty go up and down completely randomly.

Pair Corralation between Prosafe SE and Ulta Beauty

Assuming the 90 days horizon Prosafe SE is expected to generate 5.38 times more return on investment than Ulta Beauty. However, Prosafe SE is 5.38 times more volatile than Ulta Beauty. It trades about 0.09 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.21 per unit of risk. If you would invest  54.00  in Prosafe SE on October 4, 2024 and sell it today you would earn a total of  0.00  from holding Prosafe SE or generate 0.0% return on investment over 90 days.

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

Prosafe SE  vs.  Ulta Beauty

Prosafe SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosafe SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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

Pair Trading with Prosafe SE and Ulta Beauty

The main advantage of trading using opposite Prosafe SE and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosafe SE 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 Prosafe SE 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.