Correlation Between Torrid Holdings and Brilliant Earth

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

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

Diversification Opportunities for Torrid Holdings and Brilliant Earth

0.09

Correlation Coefficient

Torrid Holdings  Brilliant Earth

Significant diversification

The 3 months correlation between Torrid and Brilliant is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Torrid Holdings 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 Torrid Holdings 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 Torrid Holdings 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 Torrid Holdings i.e., Torrid Holdings and Brilliant Earth go up and down completely randomly.

Pair Corralation between Torrid Holdings and Brilliant Earth

Given the investment horizon of 90 days Torrid Holdings is expected to generate 1.38 times more return on investment than Brilliant Earth. However, Torrid Holdings is 1.38 times more volatile than Brilliant Earth Group. It trades about 0.05 of its potential returns per unit of risk. Brilliant Earth Group is currently generating about -0.02 per unit of risk. If you would invest  282.00  in Torrid Holdings on September 5, 2024 and sell it today you would earn a total of  176.00  from holding Torrid Holdings or generate 62.41% return on investment over 90 days.

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

Torrid Holdings  vs.  Brilliant Earth Group

Torrid Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Torrid Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Brilliant Earth Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brilliant Earth Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, Brilliant Earth unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Torrid Holdings and Brilliant Earth

The main advantage of trading using opposite Torrid Holdings and Brilliant Earth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torrid Holdings 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 Torrid Holdings 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.