Correlation Between Charles Colvard and Birks

Can any of the company-specific risk be diversified away by investing in both Charles Colvard and Birks 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 Charles Colvard and Birks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Charles Colvard and Birks Group, you can compare the effects of market volatilities on Charles Colvard and Birks 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 Charles Colvard with a short position of Birks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charles Colvard and Birks.

Diversification Opportunities for Charles Colvard and Birks

0.7

Correlation Coefficient

Charles Colvard  Birks

Poor diversification

The 3 months correlation between Charles and Birks is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Charles Colvard and Birks Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birks Group and Charles Colvard 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 Charles Colvard are associated (or correlated) with Birks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birks Group has no effect on the direction of Charles Colvard i.e., Charles Colvard and Birks go up and down completely randomly.

Pair Corralation between Charles Colvard and Birks

Given the investment horizon of 90 days Charles Colvard is expected to under-perform the Birks. But the stock apears to be less risky and, when comparing its historical volatility, Charles Colvard is 1.26 times less risky than Birks. The stock trades about -0.11 of its potential returns per unit of risk. The Birks Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  155.00  in Birks Group on December 28, 2024 and sell it today you would lose (33.00) from holding Birks Group or give up 21.29% of portfolio value over 90 days.

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

Charles Colvard  vs.  Birks Group

Charles Colvard

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charles Colvard has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Birks Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birks 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Charles Colvard and Birks

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

The idea behind Charles Colvard and Birks 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.