Correlation Between Brilliant Earth and Digital Brands
Can any of the company-specific risk be diversified away by investing in both Brilliant Earth and Digital Brands 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 Brilliant Earth and Digital Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brilliant Earth Group and Digital Brands Group, you can compare the effects of market volatilities on Brilliant Earth and Digital Brands 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 Brilliant Earth with a short position of Digital Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brilliant Earth and Digital Brands.
Diversification Opportunities for Brilliant Earth and Digital Brands
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brilliant and Digital is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and Digital Brands Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Brands Group and Brilliant Earth 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 Brilliant Earth Group are associated (or correlated) with Digital Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Brands Group has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and Digital Brands go up and down completely randomly.
Pair Corralation between Brilliant Earth and Digital Brands
Given the investment horizon of 90 days Brilliant Earth Group is expected to generate 0.3 times more return on investment than Digital Brands. However, Brilliant Earth Group is 3.32 times less risky than Digital Brands. It trades about -0.02 of its potential returns per unit of risk. Digital Brands Group is currently generating about -0.07 per unit of risk. If you would invest 329.00 in Brilliant Earth Group on September 19, 2024 and sell it today you would lose (129.00) from holding Brilliant Earth Group or give up 39.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brilliant Earth Group vs. Digital Brands Group
Performance |
| Timeline |
| Brilliant Earth Group |
| Digital Brands Group |
Brilliant Earth and Digital Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brilliant Earth and Digital Brands
The main advantage of trading using opposite Brilliant Earth and Digital Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brilliant Earth position performs unexpectedly, Digital Brands 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 Digital Brands will offset losses from the drop in Digital Brands' long position.| Brilliant Earth vs. Capri Holdings | Brilliant Earth vs. Movado Group | Brilliant Earth vs. Tapestry | Brilliant Earth vs. TheRealReal |
| Digital Brands vs. Capri Holdings | Digital Brands vs. Movado Group | Digital Brands vs. Tapestry | Digital Brands vs. Brilliant Earth Group |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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