Correlation Between Ulta Beauty and Bed Bath

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

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

Diversification Opportunities for Ulta Beauty and Bed Bath

0.0

Correlation Coefficient

Ulta Beauty  Bed Bath

Pay attention - limited upside

The 3 months correlation between Ulta and Bed is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Bed Bath Beyond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bed Bath Beyond 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 Bed Bath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bed Bath Beyond has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Bed Bath go up and down completely randomly.

Pair Corralation between Ulta Beauty and Bed Bath

If you would invest  38,054  in Ulta Beauty on October 10, 2024 and sell it today you would earn a total of  3,460  from holding Ulta Beauty or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ulta Beauty  vs.  Bed Bath Beyond

Ulta Beauty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Ulta Beauty sustained solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Bed Bath is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ulta Beauty and Bed Bath

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

The idea behind Ulta Beauty and Bed Bath Beyond 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.