Correlation Between REVO INSURANCE and Ulta Beauty

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

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

Diversification Opportunities for REVO INSURANCE and Ulta Beauty

-0.39

Correlation Coefficient

REVO INSURANCE  Ulta Beauty

Very good diversification

The 3 months correlation between REVO and Ulta is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding REVO INSURANCE SPA and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and REVO INSURANCE 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 REVO INSURANCE SPA 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 REVO INSURANCE i.e., REVO INSURANCE and Ulta Beauty go up and down completely randomly.

Pair Corralation between REVO INSURANCE and Ulta Beauty

Assuming the 90 days horizon REVO INSURANCE SPA is expected to generate 1.07 times more return on investment than Ulta Beauty. However, REVO INSURANCE is 1.07 times more volatile than Ulta Beauty. It trades about 0.03 of its potential returns per unit of risk. Ulta Beauty is currently generating about -0.11 per unit of risk. If you would invest  1,155  in REVO INSURANCE SPA on December 19, 2024 and sell it today you would earn a total of  35.00  from holding REVO INSURANCE SPA or generate 3.03% return on investment over 90 days.

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

REVO INSURANCE SPA  vs.  Ulta Beauty

REVO INSURANCE SPA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, REVO INSURANCE 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

Very Weak

Over the last 90 days Ulta Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 REVO INSURANCE and Ulta Beauty

The main advantage of trading using opposite REVO INSURANCE and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REVO INSURANCE 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 REVO INSURANCE SPA 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.