Correlation Between Brilliant Earth and AKA Brands

Can any of the company-specific risk be diversified away by investing in both Brilliant Earth and AKA 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 AKA 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 AKA Brands Holding, you can compare the effects of market volatilities on Brilliant Earth and AKA 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 AKA Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brilliant Earth and AKA Brands.

Diversification Opportunities for Brilliant Earth and AKA Brands

0.23

Correlation Coefficient

Brilliant Earth  AKA Brands

Modest diversification

The 3 months correlation between Brilliant and AKA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding 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 AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and AKA Brands go up and down completely randomly.

Pair Corralation between Brilliant Earth and AKA Brands

Given the investment horizon of 90 days Brilliant Earth Group is expected to generate 0.66 times more return on investment than AKA Brands. However, Brilliant Earth Group is 1.52 times less risky than AKA Brands. It trades about 0.04 of its potential returns per unit of risk. AKA Brands Holding is currently generating about -0.01 per unit of risk. If you would invest  183.00  in Brilliant Earth Group on September 7, 2024 and sell it today you would earn a total of  10.00  from holding Brilliant Earth Group or generate 5.46% return on investment over 90 days.

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

Brilliant Earth Group  vs.  AKA Brands Holding

Brilliant Earth Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brilliant Earth Group are ranked lower than 3 (%) 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.

AKA Brands Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, AKA Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brilliant Earth and AKA Brands

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

The idea behind Brilliant Earth Group and AKA Brands Holding 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..