Correlation Between Lands End and Ulta Beauty

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Can any of the company-specific risk be diversified away by investing in both Lands End 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 Lands End and Ulta Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lands End and Ulta Beauty, you can compare the effects of market volatilities on Lands End 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 Lands End with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lands End and Ulta Beauty.

Diversification Opportunities for Lands End and Ulta Beauty

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Lands and Ulta Beauty is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Lands End 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 Lands End 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 Lands End i.e., Lands End and Ulta Beauty go up and down completely randomly.

Pair Corralation between Lands End and Ulta Beauty

Allowing for the 90-day total investment horizon Lands End is expected to generate 2.0 times more return on investment than Ulta Beauty. However, Lands End is 2.0 times more volatile than Ulta Beauty. It trades about 0.32 of its potential returns per unit of risk. Ulta Beauty is currently generating about 0.03 per unit of risk. If you would invest  1,068  in Lands End on May 20, 2022 and sell it today you would earn a total of  657.00  from holding Lands End or generate 61.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lands End  vs.  Ulta Beauty

 Performance (%) 
       Timeline  
Lands End 
Lands Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lands End are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Lands End exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lands Price Channel

Ulta Beauty 
Ulta Beauty Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ulta Beauty sustained solid returns over the last few months and may actually be approaching a breakup point.

Ulta Beauty Price Channel

Lands End and Ulta Beauty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lands End and Ulta Beauty

The main advantage of trading using opposite Lands End and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End 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 Lands End 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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