Correlation Between Ulta Beauty and Dicks Sporting

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

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

Diversification Opportunities for Ulta Beauty and Dicks Sporting

0.02

Correlation Coefficient

Ulta Beauty  Dicks Sporting

Significant diversification

The 3 months correlation between Ulta and Dicks is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Dicks Sporting go up and down completely randomly.

Pair Corralation between Ulta Beauty and Dicks Sporting

Given the investment horizon of 90 days Ulta Beauty is expected to generate 1.04 times more return on investment than Dicks Sporting. However, Ulta Beauty is 1.04 times more volatile than Dicks Sporting Goods. It trades about 0.07 of its potential returns per unit of risk. Dicks Sporting Goods is currently generating about -0.08 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ulta Beauty  vs.  Dicks Sporting Goods

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.

Dicks Sporting Goods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dicks Sporting Goods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ulta Beauty and Dicks Sporting

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

The idea behind Ulta Beauty and Dicks Sporting Goods 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.