Correlation Between Patria Investments and Ulta Beauty

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

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

Diversification Opportunities for Patria Investments and Ulta Beauty

0.78

Correlation Coefficient

Patria Investments  Ulta Beauty

Poor diversification

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

Pair Corralation between Patria Investments and Ulta Beauty

Assuming the 90 days trading horizon Patria Investments Limited is expected to under-perform the Ulta Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Patria Investments Limited is 1.09 times less risky than Ulta Beauty. The stock trades about -0.08 of its potential returns per unit of risk. The Ulta Beauty is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12,975  in Ulta Beauty on October 8, 2024 and sell it today you would earn a total of  415.00  from holding Ulta Beauty or generate 3.2% return on investment over 90 days.

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

Patria Investments Limited  vs.  Ulta Beauty

Patria Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Ulta Beauty

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 15 (%) 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.

Pair Trading with Patria Investments and Ulta Beauty

The main advantage of trading using opposite Patria Investments and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patria Investments 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 Patria Investments Limited 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.