Correlation Between Caesars Entertainment, and Ulta Beauty

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

Diversification Opportunities for Caesars Entertainment, and Ulta Beauty

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Caesars and Ulta is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Caesars Entertainment, and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Caesars Entertainment, 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 Caesars Entertainment, 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 Caesars Entertainment, i.e., Caesars Entertainment, and Ulta Beauty go up and down completely randomly.

Pair Corralation between Caesars Entertainment, and Ulta Beauty

Assuming the 90 days trading horizon Caesars Entertainment, is expected to under-perform the Ulta Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Caesars Entertainment, is 1.22 times less risky than Ulta Beauty. The stock trades about -0.16 of its potential returns per unit of risk. The Ulta Beauty is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,255  in Ulta Beauty on October 9, 2024 and sell it today you would earn a total of  1,493  from holding Ulta Beauty or generate 13.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy97.3%
ValuesDaily Returns

Caesars Entertainment,  vs.  Ulta Beauty

 Performance 
       Timeline  
Caesars Entertainment, 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Caesars Entertainment, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Ulta Beauty 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Ulta Beauty sustained solid returns over the last few months and may actually be approaching a breakup point.

Caesars Entertainment, and Ulta Beauty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Caesars Entertainment, and Ulta Beauty

The main advantage of trading using opposite Caesars Entertainment, and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caesars Entertainment, 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 Caesars Entertainment, 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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