Correlation Between Minerals Technologies and Ulta Beauty

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

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

Diversification Opportunities for Minerals Technologies and Ulta Beauty

-0.69

Correlation Coefficient

Minerals Technologies  Ulta Beauty

Excellent diversification

The 3 months correlation between Minerals and Ulta is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Minerals Technologies 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 Minerals Technologies 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 Minerals Technologies i.e., Minerals Technologies and Ulta Beauty go up and down completely randomly.

Pair Corralation between Minerals Technologies and Ulta Beauty

Considering the 90-day investment horizon Minerals Technologies is expected to under-perform the Ulta Beauty. In addition to that, Minerals Technologies is 1.14 times more volatile than Ulta Beauty. It trades about -0.03 of its total potential returns per unit of risk. Ulta Beauty is currently generating about 0.1 per unit of volatility. If you would invest  38,183  in Ulta Beauty on March 20, 2024 and sell it today you would earn a total of  732.00  from holding Ulta Beauty or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Minerals Technologies  vs.  Ulta Beauty

Minerals Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Minerals Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Minerals Technologies and Ulta Beauty

The main advantage of trading using opposite Minerals Technologies and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minerals Technologies 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 Minerals Technologies 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.