Correlation Between Ulta Beauty and Magazine Luiza

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

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

Diversification Opportunities for Ulta Beauty and Magazine Luiza

-0.64

Correlation Coefficient

Ulta Beauty  Magazine Luiza

Excellent diversification

The 3 months correlation between Ulta and Magazine is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza SA and Ulta Beauty 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 Ulta Beauty are associated (or correlated) with Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Magazine Luiza go up and down completely randomly.

Pair Corralation between Ulta Beauty and Magazine Luiza

Assuming the 90 days trading horizon Ulta Beauty is expected to under-perform the Magazine Luiza. But the stock apears to be less risky and, when comparing its historical volatility, Ulta Beauty is 1.59 times less risky than Magazine Luiza. The stock trades about -0.18 of its potential returns per unit of risk. The Magazine Luiza SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  653.00  in Magazine Luiza SA on December 24, 2024 and sell it today you would earn a total of  357.00  from holding Magazine Luiza SA or generate 54.67% return on investment over 90 days.

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

Ulta Beauty  vs.  Magazine Luiza SA

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 weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Magazine Luiza SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magazine Luiza SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Magazine Luiza unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ulta Beauty and Magazine Luiza

The main advantage of trading using opposite Ulta Beauty and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.

The idea behind Ulta Beauty and Magazine Luiza SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.