Correlation Between Signet Jewelers and Birks

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

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

Diversification Opportunities for Signet Jewelers and Birks

0.7

Correlation Coefficient

Signet Jewelers  Birks

Poor diversification

The 3 months correlation between Signet and Birks is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Signet Jewelers and Birks Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birks Group and Signet Jewelers 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 Signet Jewelers 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 Signet Jewelers i.e., Signet Jewelers and Birks go up and down completely randomly.

Pair Corralation between Signet Jewelers and Birks

Considering the 90-day investment horizon Signet Jewelers is expected to under-perform the Birks. But the stock apears to be less risky and, when comparing its historical volatility, Signet Jewelers is 1.34 times less risky than Birks. The stock trades about -0.2 of its potential returns per unit of risk. The Birks Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  161.00  in Birks Group on December 19, 2024 and sell it today you would lose (38.00) from holding Birks Group or give up 23.6% of portfolio value over 90 days.

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

Signet Jewelers  vs.  Birks Group

Signet Jewelers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Signet Jewelers 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 forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Signet Jewelers and Birks

The main advantage of trading using opposite Signet Jewelers and Birks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signet Jewelers 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 Signet Jewelers 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.