Correlation Between Brilliant Earth and Foot Locker

Can any of the company-specific risk be diversified away by investing in both Brilliant Earth and Foot Locker 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 Foot Locker 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 Foot Locker, you can compare the effects of market volatilities on Brilliant Earth and Foot Locker 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 Foot Locker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brilliant Earth and Foot Locker.

Diversification Opportunities for Brilliant Earth and Foot Locker

-0.11

Correlation Coefficient

Brilliant Earth  Foot Locker

Good diversification

The 3 months correlation between Brilliant and Foot is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and Foot Locker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foot Locker 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 Foot Locker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foot Locker has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and Foot Locker go up and down completely randomly.

Pair Corralation between Brilliant Earth and Foot Locker

Given the investment horizon of 90 days Brilliant Earth Group is expected to generate 1.3 times more return on investment than Foot Locker. However, Brilliant Earth is 1.3 times more volatile than Foot Locker. It trades about 0.21 of its potential returns per unit of risk. Foot Locker is currently generating about 0.0 per unit of risk. If you would invest  155.00  in Brilliant Earth Group on October 1, 2024 and sell it today you would earn a total of  49.00  from holding Brilliant Earth Group or generate 31.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Brilliant Earth Group  vs.  Foot Locker

Brilliant Earth Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brilliant Earth Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Brilliant Earth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Foot Locker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Brilliant Earth and Foot Locker

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

The idea behind Brilliant Earth Group and Foot Locker 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..