Correlation Between Movado and Brilliant Earth

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

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

Diversification Opportunities for Movado and Brilliant Earth

0.53

Correlation Coefficient

Movado  Brilliant Earth

Very weak diversification

The 3 months correlation between Movado and Brilliant is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Movado Group and Brilliant Earth Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brilliant Earth Group and Movado 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 Movado Group are associated (or correlated) with Brilliant Earth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brilliant Earth Group has no effect on the direction of Movado i.e., Movado and Brilliant Earth go up and down completely randomly.

Pair Corralation between Movado and Brilliant Earth

Considering the 90-day investment horizon Movado is expected to generate 1.64 times less return on investment than Brilliant Earth. But when comparing it to its historical volatility, Movado Group is 2.67 times less risky than Brilliant Earth. It trades about 0.06 of its potential returns per unit of risk. Brilliant Earth Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  160.00  in Brilliant Earth Group on November 19, 2024 and sell it today you would earn a total of  6.00  from holding Brilliant Earth Group or generate 3.75% return on investment over 90 days.

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

Movado Group  vs.  Brilliant Earth Group

Movado Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Movado Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Movado is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Brilliant Earth Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brilliant Earth Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Brilliant Earth may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Movado and Brilliant Earth

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

The idea behind Movado Group and Brilliant Earth 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.