Correlation Between Ulta Beauty and QBE Insurance

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

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

Diversification Opportunities for Ulta Beauty and QBE Insurance

0.41

Correlation Coefficient

Ulta Beauty  QBE Insurance

Very weak diversification

The 3 months correlation between Ulta and QBE is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group 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 QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and QBE Insurance go up and down completely randomly.

Pair Corralation between Ulta Beauty and QBE Insurance

Assuming the 90 days horizon Ulta Beauty is expected to generate 10.64 times less return on investment than QBE Insurance. In addition to that, Ulta Beauty is 1.41 times more volatile than QBE Insurance Group. It trades about 0.0 of its total potential returns per unit of risk. QBE Insurance Group is currently generating about 0.06 per unit of volatility. If you would invest  740.00  in QBE Insurance Group on October 4, 2024 and sell it today you would earn a total of  410.00  from holding QBE Insurance Group or generate 55.41% return on investment over 90 days.

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

Ulta Beauty  vs.  QBE Insurance Group

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.

QBE Insurance Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, QBE Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ulta Beauty and QBE Insurance

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

The idea behind Ulta Beauty and QBE Insurance Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.