Correlation Between Brilliant Earth and Childrens Place

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

Diversification Opportunities for Brilliant Earth and Childrens Place

0.29

Correlation Coefficient

Brilliant Earth  Childrens Place

Modest diversification

The 3 months correlation between Brilliant and Childrens is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and Childrens Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Childrens Place 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 Childrens Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Childrens Place has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and Childrens Place go up and down completely randomly.

Pair Corralation between Brilliant Earth and Childrens Place

Given the investment horizon of 90 days Brilliant Earth Group is expected to generate 0.35 times more return on investment than Childrens Place. However, Brilliant Earth Group is 2.85 times less risky than Childrens Place. It trades about 0.27 of its potential returns per unit of risk. Childrens Place is currently generating about -0.1 per unit of risk. If you would invest  174.00  in Brilliant Earth Group on September 15, 2024 and sell it today you would earn a total of  30.00  from holding Brilliant Earth Group or generate 17.24% return on investment over 90 days.

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

Brilliant Earth Group  vs.  Childrens Place

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 comparatively stable essential indicators, Brilliant Earth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Childrens Place

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Childrens Place are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Childrens Place exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brilliant Earth and Childrens Place

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

The idea behind Brilliant Earth Group and Childrens Place 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.