Correlation Between Ulta Beauty and EVgo Equity

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

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

Diversification Opportunities for Ulta Beauty and EVgo Equity

-0.35

Correlation Coefficient

Ulta Beauty  EVgo Equity

Very good diversification

The 3 months correlation between Ulta and EVgo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and EVgo Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVgo Equity Warrants 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 EVgo Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVgo Equity Warrants has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and EVgo Equity go up and down completely randomly.

Pair Corralation between Ulta Beauty and EVgo Equity

Given the investment horizon of 90 days Ulta Beauty is expected to generate 25.78 times less return on investment than EVgo Equity. But when comparing it to its historical volatility, Ulta Beauty is 10.26 times less risky than EVgo Equity. It trades about 0.05 of its potential returns per unit of risk. EVgo Equity Warrants is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  31.00  in EVgo Equity Warrants on September 26, 2024 and sell it today you would earn a total of  36.00  from holding EVgo Equity Warrants or generate 116.13% 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.  EVgo Equity Warrants

Ulta Beauty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 3 (%) 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 January 2025.

EVgo Equity Warrants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVgo Equity Warrants are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EVgo Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ulta Beauty and EVgo Equity

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

The idea behind Ulta Beauty and EVgo Equity Warrants 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.