Correlation Between Vipshop Holdings and Ulta Beauty

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

Diversification Opportunities for Vipshop Holdings and Ulta Beauty

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Vipshop and Ulta Beauty is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Ltd and Ulta Beauty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulta Beauty and Vipshop Holdings 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 Vipshop 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 Vipshop Holdings i.e., Vipshop Holdings and Ulta Beauty go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Ulta Beauty

Given the investment horizon of 90 days Vipshop Holdings is expected to under-perform the Ulta Beauty. In addition to that, Vipshop Holdings is 2.93 times more volatile than Ulta Beauty. It trades about -0.16 of its total potential returns per unit of risk. Ulta Beauty is currently generating about -0.18 per unit of volatility. If you would invest  41,925  in Ulta Beauty on June 26, 2022 and sell it today you would lose (2,695)  from holding Ulta Beauty or give up 6.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Vipshop Holdings Ltd  vs.  Ulta Beauty

 Performance (%) 
       Timeline  
Vipshop Holdings 
Vipshop Performance
0 of 100
Over the last 90 days Vipshop Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Vipshop Price Channel

Ulta Beauty 
Ulta Beauty Performance
0 of 100
Over the last 90 days Ulta Beauty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ulta Beauty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Ulta Beauty Price Channel

Vipshop Holdings and Ulta Beauty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vipshop Holdings and Ulta Beauty

The main advantage of trading using opposite Vipshop Holdings and Ulta Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings 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.
Vipshop Holdings vs. BUSHVELD MINERALS LTD
The idea behind Vipshop 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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