Correlation Between Brilliant Earth and Torrid Holdings

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

Diversification Opportunities for Brilliant Earth and Torrid Holdings

0.15

Correlation Coefficient

Brilliant Earth  Torrid Holdings

Average diversification

The 3 months correlation between Brilliant and Torrid is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings 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 Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Brilliant Earth i.e., Brilliant Earth and Torrid Holdings go up and down completely randomly.

Pair Corralation between Brilliant Earth and Torrid Holdings

Given the investment horizon of 90 days Brilliant Earth Group is expected to under-perform the Torrid Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Brilliant Earth Group is 1.51 times less risky than Torrid Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Torrid Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  401.00  in Torrid Holdings on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Torrid Holdings or generate 1.0% return on investment over 90 days.

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

Brilliant Earth Group  vs.  Torrid Holdings

Brilliant Earth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brilliant Earth Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Brilliant Earth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Torrid Holdings

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Torrid Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Torrid Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brilliant Earth and Torrid Holdings

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

The idea behind Brilliant Earth Group and Torrid Holdings 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.