Correlation Between IMedia Brands and Ulta Beauty

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

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

Diversification Opportunities for IMedia Brands and Ulta Beauty

0.05

Correlation Coefficient

IMedia Brands  Ulta Beauty

Significant diversification

The 3 months correlation between IMedia and Ulta is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding IMedia Brands and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and IMedia Brands 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 IMedia Brands are associated (or correlated) with Ulta Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ulta Beauty has no effect on the direction of IMedia Brands i.e., IMedia Brands and Ulta Beauty go up and down completely randomly.

Pair Corralation between IMedia Brands and Ulta Beauty

If you would invest  0.04  in IMedia Brands on January 24, 2024 and sell it today you would earn a total of  0.00  from holding IMedia Brands or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

IMedia Brands  vs.  Ulta Beauty

IMedia Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IMedia Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, IMedia Brands is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Ulta Beauty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ulta Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with IMedia Brands and Ulta Beauty

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

The idea behind IMedia Brands and Ulta Beauty 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.