Correlation Between Charter Communications and Ulta Beauty

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

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

Diversification Opportunities for Charter Communications and Ulta Beauty

-0.16

Correlation Coefficient

Charter Communications  Ulta Beauty

Good diversification

The 3 months correlation between Charter and Ulta is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Charter Communications 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 Charter Communications 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 Charter Communications i.e., Charter Communications and Ulta Beauty go up and down completely randomly.

Pair Corralation between Charter Communications and Ulta Beauty

Assuming the 90 days trading horizon Charter Communications is expected to generate 0.6 times more return on investment than Ulta Beauty. However, Charter Communications is 1.67 times less risky than Ulta Beauty. It trades about 0.0 of its potential returns per unit of risk. Ulta Beauty is currently generating about -0.15 per unit of risk. If you would invest  33,565  in Charter Communications on December 23, 2024 and sell it today you would lose (180.00) from holding Charter Communications or give up 0.54% of portfolio value over 90 days.

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

Charter Communications  vs.  Ulta Beauty

Charter Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Charter Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ulta Beauty

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Charter Communications and Ulta Beauty

The main advantage of trading using opposite Charter Communications and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications 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 Charter Communications 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..