Correlation Between Ulta Beauty and Fossil
Can any of the company-specific risk be diversified away by investing in both Ulta Beauty and Fossil 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 Fossil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ulta Beauty and Fossil Group, you can compare the effects of market volatilities on Ulta Beauty and Fossil 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 Fossil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ulta Beauty and Fossil.
Diversification Opportunities for Ulta Beauty and Fossil
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ulta and Fossil is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ulta Beauty and Fossil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fossil Group 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 Fossil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fossil Group has no effect on the direction of Ulta Beauty i.e., Ulta Beauty and Fossil go up and down completely randomly.
Pair Corralation between Ulta Beauty and Fossil
Given the investment horizon of 90 days Ulta Beauty is expected to under-perform the Fossil. But the stock apears to be less risky and, when comparing its historical volatility, Ulta Beauty is 3.18 times less risky than Fossil. The stock trades about -0.25 of its potential returns per unit of risk. The Fossil Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 108.00 in Fossil Group on December 29, 2023 and sell it today you would lose (11.00) from holding Fossil Group or give up 10.19% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ulta Beauty vs. Fossil Group
Performance |
Timeline |
Ulta Beauty |
Fossil Group |
Ulta Beauty and Fossil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ulta Beauty and Fossil
The main advantage of trading using opposite Ulta Beauty and Fossil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ulta Beauty position performs unexpectedly, Fossil 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 Fossil will offset losses from the drop in Fossil's long position.Ulta Beauty vs. Macys Inc | Ulta Beauty vs. Wayfair | Ulta Beauty vs. 1StdibsCom | Ulta Beauty vs. AutoNation |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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