Correlation Between ATRenew and Ulta Beauty

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

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

Diversification Opportunities for ATRenew and Ulta Beauty

-0.18

Correlation Coefficient

ATRenew  Ulta Beauty

Good diversification

The 3 months correlation between ATRenew and Ulta is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ATRenew Inc DRC and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and ATRenew 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 ATRenew Inc DRC 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 ATRenew i.e., ATRenew and Ulta Beauty go up and down completely randomly.

Pair Corralation between ATRenew and Ulta Beauty

Given the investment horizon of 90 days ATRenew Inc DRC is expected to under-perform the Ulta Beauty. In addition to that, ATRenew is 1.69 times more volatile than Ulta Beauty. It trades about -0.07 of its total potential returns per unit of risk. Ulta Beauty is currently generating about -0.01 per unit of volatility. If you would invest  37,525  in Ulta Beauty on November 27, 2024 and sell it today you would lose (972.00) from holding Ulta Beauty or give up 2.59% of portfolio value over 90 days.

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

ATRenew Inc DRC  vs.  Ulta Beauty

ATRenew Inc DRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ATRenew Inc DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 somewhat strong basic indicators, Ulta Beauty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ATRenew and Ulta Beauty

The main advantage of trading using opposite ATRenew and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATRenew 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 ATRenew Inc DRC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.