Correlation Between Spectrum Brands and Ulta Beauty

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Can any of the company-specific risk be diversified away by investing in both Spectrum 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 Spectrum 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 Spectrum Brands Holdings and Ulta Beauty, you can compare the effects of market volatilities on Spectrum 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 Spectrum Brands with a short position of Ulta Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Brands and Ulta Beauty.

Diversification Opportunities for Spectrum Brands and Ulta Beauty

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Spectrum and Ulta Beauty is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Spectrum 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 Spectrum Brands Holdings 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 Spectrum Brands i.e., Spectrum Brands and Ulta Beauty go up and down completely randomly.

Pair Corralation between Spectrum Brands and Ulta Beauty

Considering the 90-day investment horizon Spectrum Brands Holdings is expected to under-perform the Ulta Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Spectrum Brands Holdings is 1.06 times less risky than Ulta Beauty. The stock trades about -0.02 of its potential returns per unit of risk. The Ulta Beauty is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23,545  in Ulta Beauty on July 9, 2022 and sell it today you would earn a total of  15,663  from holding Ulta Beauty or generate 66.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Spectrum Brands Holdings  vs.  Ulta Beauty

 Performance (%) 
       Timeline  
Spectrum Brands Holdings 
Spectrum Performance
0 of 100
Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Spectrum Price Channel

Ulta Beauty 
Ulta Beauty Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ulta Beauty are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ulta Beauty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ulta Beauty Price Channel

Spectrum Brands and Ulta Beauty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spectrum Brands and Ulta Beauty

The main advantage of trading using opposite Spectrum Brands and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum 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.
Spectrum Brands vs. Amazon Inc
The idea behind Spectrum Brands Holdings 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.
Ulta Beauty vs. Best Buy Company
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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