Correlation Between Brilliant Earth and TheRealReal

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

Diversification Opportunities for Brilliant Earth and TheRealReal

0.51

Correlation Coefficient

Brilliant Earth  TheRealReal

Very weak diversification

The 3 months correlation between Brilliant and TheRealReal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and TheRealReal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TheRealReal 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 TheRealReal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TheRealReal has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and TheRealReal go up and down completely randomly.

Pair Corralation between Brilliant Earth and TheRealReal

Given the investment horizon of 90 days Brilliant Earth Group is expected to under-perform the TheRealReal. But the stock apears to be less risky and, when comparing its historical volatility, Brilliant Earth Group is 1.58 times less risky than TheRealReal. The stock trades about -0.09 of its potential returns per unit of risk. The TheRealReal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  588.00  in TheRealReal on November 28, 2024 and sell it today you would earn a total of  96.00  from holding TheRealReal or generate 16.33% return on investment over 90 days.

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

Brilliant Earth Group  vs.  TheRealReal

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

TheRealReal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TheRealReal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, TheRealReal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brilliant Earth and TheRealReal

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

The idea behind Brilliant Earth Group and TheRealReal 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 Stocks Directory module to find actively traded stocks across global markets.