Correlation Between Xtrackers ShortDAX and Ulta Beauty

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

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

Diversification Opportunities for Xtrackers ShortDAX and Ulta Beauty

-0.78

Correlation Coefficient

Xtrackers ShortDAX  Ulta Beauty

Pay attention - limited upside

The 3 months correlation between Xtrackers and Ulta is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Ulta Beauty go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Ulta Beauty

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Ulta Beauty. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.38 times less risky than Ulta Beauty. The etf trades about -0.05 of its potential returns per unit of risk. The Ulta Beauty is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  45,250  in Ulta Beauty on October 4, 2024 and sell it today you would lose (3,120) from holding Ulta Beauty or give up 6.9% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  Ulta Beauty

Xtrackers ShortDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the 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 Xtrackers ShortDAX and Ulta Beauty

The main advantage of trading using opposite Xtrackers ShortDAX and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.