Correlation Between Ulta Beauty and GrowGeneration Corp

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

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

Diversification Opportunities for Ulta Beauty and GrowGeneration Corp

0.86

Correlation Coefficient

Ulta Beauty  GrowGeneration Corp

Very poor diversification

The 3 months correlation between Ulta and GrowGeneration is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and GrowGeneration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrowGeneration Corp 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 GrowGeneration Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrowGeneration Corp has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and GrowGeneration Corp go up and down completely randomly.

Pair Corralation between Ulta Beauty and GrowGeneration Corp

Given the investment horizon of 90 days Ulta Beauty is expected to generate 0.66 times more return on investment than GrowGeneration Corp. However, Ulta Beauty is 1.51 times less risky than GrowGeneration Corp. It trades about -0.1 of its potential returns per unit of risk. GrowGeneration Corp is currently generating about -0.12 per unit of risk. If you would invest  43,540  in Ulta Beauty on December 30, 2024 and sell it today you would lose (7,593) from holding Ulta Beauty or give up 17.44% of portfolio value over 90 days.

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

Ulta Beauty  vs.  GrowGeneration Corp

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 unfluctuating performance in the last few months, the Stock's basic 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.

GrowGeneration Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GrowGeneration Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ulta Beauty and GrowGeneration Corp

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

The idea behind Ulta Beauty and GrowGeneration Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.