Correlation Between Gap, and Ulta Beauty

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

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

Diversification Opportunities for Gap, and Ulta Beauty

-0.34

Correlation Coefficient

Gap,  Ulta Beauty

Very good diversification

The 3 months correlation between Gap, and Ulta is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Ulta Beauty go up and down completely randomly.

Pair Corralation between Gap, and Ulta Beauty

Considering the 90-day investment horizon The Gap, is expected to generate 1.43 times more return on investment than Ulta Beauty. However, Gap, is 1.43 times more volatile than Ulta Beauty. It trades about 0.05 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.07 per unit of risk. If you would invest  2,266  in The Gap, on September 1, 2024 and sell it today you would earn a total of  159.00  from holding The Gap, or generate 7.02% return on investment over 90 days.

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

The Gap,  vs.  Ulta Beauty

Gap,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ulta Beauty

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Ulta Beauty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Gap, and Ulta Beauty

The main advantage of trading using opposite Gap, and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.