Correlation Between Brilliant Earth and Fossil

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

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

Diversification Opportunities for Brilliant Earth and Fossil

-0.38

Correlation Coefficient

Brilliant Earth  Fossil

Very good diversification

The 3 months correlation between Brilliant and Fossil is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and Fossil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fossil Group and Brilliant Earth 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 Brilliant Earth Group are associated (or correlated) with Fossil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fossil Group has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and Fossil go up and down completely randomly.

Pair Corralation between Brilliant Earth and Fossil

Given the investment horizon of 90 days Brilliant Earth Group is expected to under-perform the Fossil. But the stock apears to be less risky and, when comparing its historical volatility, Brilliant Earth Group is 1.19 times less risky than Fossil. The stock trades about -0.05 of its potential returns per unit of risk. The Fossil Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Fossil Group on August 24, 2024 and sell it today you would lose (23.00) from holding Fossil Group or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brilliant Earth Group  vs.  Fossil Group

Brilliant Earth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brilliant Earth Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fossil Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fossil Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fossil is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Brilliant Earth and Fossil

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

The idea behind Brilliant Earth Group and Fossil Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.