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

0.7

Correlation Coefficient

Brilliant Earth  Fossil

Poor diversification

The 3 months correlation between Brilliant and Fossil is 0.7. 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 generate 0.81 times more return on investment than Fossil. However, Brilliant Earth Group is 1.23 times less risky than Fossil. It trades about -0.08 of its potential returns per unit of risk. Fossil Group is currently generating about -0.1 per unit of risk. If you would invest  210.00  in Brilliant Earth Group on December 30, 2024 and sell it today you would lose (54.00) from holding Brilliant Earth Group or give up 25.71% of portfolio value over 90 days.

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

Brilliant Earth Group  vs.  Fossil Group

Brilliant Earth Group

Risk-Adjusted Performance

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fossil Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fossil Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.