Correlation Between Bed Bath and Ulta Beauty

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

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

Diversification Opportunities for Bed Bath and Ulta Beauty

0.0

Correlation Coefficient

Bed Bath  Ulta Beauty

Pay attention - limited upside

The 3 months correlation between Bed and Ulta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Bed Bath 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 Bed Bath Beyond 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 Bed Bath i.e., Bed Bath and Ulta Beauty go up and down completely randomly.

Pair Corralation between Bed Bath and Ulta Beauty

If you would invest  37,330  in Ulta Beauty on October 25, 2024 and sell it today you would earn a total of  4,514  from holding Ulta Beauty or generate 12.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bed Bath Beyond  vs.  Ulta Beauty

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Bed Bath is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ulta Beauty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 7 (%) 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.

Pair Trading with Bed Bath and Ulta Beauty

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

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.