Correlation Between Seaboard and Ulta Beauty

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

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

Diversification Opportunities for Seaboard and Ulta Beauty

-0.66

Correlation Coefficient

Seaboard  Ulta Beauty

Excellent diversification

The 3 months correlation between Seaboard and Ulta is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Seaboard 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 Seaboard 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 Seaboard i.e., Seaboard and Ulta Beauty go up and down completely randomly.

Pair Corralation between Seaboard and Ulta Beauty

Assuming the 90 days horizon Seaboard is expected to under-perform the Ulta Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 2.64 times less risky than Ulta Beauty. The stock trades about -0.24 of its potential returns per unit of risk. The Ulta Beauty is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  37,450  in Ulta Beauty on October 4, 2024 and sell it today you would earn a total of  4,680  from holding Ulta Beauty or generate 12.5% return on investment over 90 days.

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

Seaboard  vs.  Ulta Beauty

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 Seaboard and Ulta Beauty

The main advantage of trading using opposite Seaboard and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seaboard 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 Seaboard 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.