Correlation Between Fossil and Charles Colvard

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

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

Diversification Opportunities for Fossil and Charles Colvard

0.1

Correlation Coefficient

Fossil  Charles Colvard

Average diversification

The 3 months correlation between Fossil and Charles is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Charles Colvard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Colvard and Fossil 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 Fossil Group are associated (or correlated) with Charles Colvard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Colvard has no effect on the direction of Fossil i.e., Fossil and Charles Colvard go up and down completely randomly.

Pair Corralation between Fossil and Charles Colvard

Given the investment horizon of 90 days Fossil Group is expected to generate 1.49 times more return on investment than Charles Colvard. However, Fossil is 1.49 times more volatile than Charles Colvard. It trades about 0.1 of its potential returns per unit of risk. Charles Colvard is currently generating about 0.04 per unit of risk. If you would invest  119.00  in Fossil Group on November 19, 2024 and sell it today you would earn a total of  54.00  from holding Fossil Group or generate 45.38% return on investment over 90 days.

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

Fossil Group  vs.  Charles Colvard

Fossil Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fossil Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Fossil disclosed solid returns over the last few months and may actually be approaching a breakup point.

Charles Colvard

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Colvard are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical indicators, Charles Colvard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fossil and Charles Colvard

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

The idea behind Fossil Group and Charles Colvard 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.