Correlation Between Brilliant Earth and Xcel Brands

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

Diversification Opportunities for Brilliant Earth and Xcel Brands

-0.65

Correlation Coefficient

Brilliant Earth  Xcel Brands

Excellent diversification

The 3 months correlation between Brilliant and Xcel is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and Xcel Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Brands 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 Xcel Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Brands has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and Xcel Brands go up and down completely randomly.

Pair Corralation between Brilliant Earth and Xcel Brands

Given the investment horizon of 90 days Brilliant Earth Group is expected to under-perform the Xcel Brands. But the stock apears to be less risky and, when comparing its historical volatility, Brilliant Earth Group is 4.5 times less risky than Xcel Brands. The stock trades about -0.07 of its potential returns per unit of risk. The Xcel Brands is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Xcel Brands on October 20, 2024 and sell it today you would lose (8.00) from holding Xcel Brands or give up 15.69% of portfolio value over 90 days.

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

Brilliant Earth Group  vs.  Xcel Brands

Brilliant Earth Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brilliant Earth Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Brilliant Earth unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xcel Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xcel Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Brilliant Earth and Xcel Brands

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

The idea behind Brilliant Earth Group and Xcel Brands 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.