Correlation Between Under Armour and Brilliant Earth

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

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

Diversification Opportunities for Under Armour and Brilliant Earth

-0.47

Correlation Coefficient

Under Armour  Brilliant Earth

Very good diversification

The 3 months correlation between Under and Brilliant is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour A 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 Under Armour 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 Under Armour A 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 Under Armour i.e., Under Armour and Brilliant Earth go up and down completely randomly.

Pair Corralation between Under Armour and Brilliant Earth

Considering the 90-day investment horizon Under Armour A is expected to generate 1.16 times more return on investment than Brilliant Earth. However, Under Armour is 1.16 times more volatile than Brilliant Earth Group. It trades about 0.08 of its potential returns per unit of risk. Brilliant Earth Group is currently generating about 0.03 per unit of risk. If you would invest  820.00  in Under Armour A on September 3, 2024 and sell it today you would earn a total of  151.00  from holding Under Armour A or generate 18.41% return on investment over 90 days.

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

Under Armour A  vs.  Brilliant Earth Group

Under Armour A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Under Armour A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Under Armour sustained solid returns over the last few months and may actually be approaching a breakup point.

Brilliant Earth Group

Risk-Adjusted Performance

2 of 100

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 January 2025.

Pair Trading with Under Armour and Brilliant Earth

The main advantage of trading using opposite Under Armour and Brilliant Earth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour A 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.