Correlation Between Ulta Beauty and AutoZone

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

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

Diversification Opportunities for Ulta Beauty and AutoZone

-0.12

Correlation Coefficient

Ulta Beauty  AutoZone

Good diversification

The 3 months correlation between Ulta and AutoZone is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and AutoZone go up and down completely randomly.

Pair Corralation between Ulta Beauty and AutoZone

Given the investment horizon of 90 days Ulta Beauty is expected to generate 1.53 times more return on investment than AutoZone. However, Ulta Beauty is 1.53 times more volatile than AutoZone. It trades about 0.07 of its potential returns per unit of risk. AutoZone is currently generating about 0.02 per unit of risk. If you would invest  35,880  in Ulta Beauty on September 1, 2024 and sell it today you would earn a total of  2,784  from holding Ulta Beauty or generate 7.76% return on investment over 90 days.

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

Ulta Beauty  vs.  AutoZone

Ulta Beauty

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Ulta Beauty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AutoZone

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoZone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ulta Beauty and AutoZone

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

The idea behind Ulta Beauty and AutoZone 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.