Correlation Between American Mutual and Brown Advisory

Can any of the company-specific risk be diversified away by investing in both American Mutual and Brown Advisory 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 American Mutual and Brown Advisory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Mutual Fund and Brown Advisory Tax Exempt, you can compare the effects of market volatilities on American Mutual and Brown Advisory 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 American Mutual with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Brown Advisory.

Diversification Opportunities for American Mutual and Brown Advisory

0.05

Correlation Coefficient

American Mutual  Brown Advisory

Significant diversification

The 3 months correlation between American and Brown is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Brown Advisory Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Tax and American Mutual 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 American Mutual Fund are associated (or correlated) with Brown Advisory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Advisory Tax has no effect on the direction of American Mutual i.e., American Mutual and Brown Advisory go up and down completely randomly.

Pair Corralation between American Mutual and Brown Advisory

Assuming the 90 days horizon American Mutual Fund is expected to generate 2.29 times more return on investment than Brown Advisory. However, American Mutual is 2.29 times more volatile than Brown Advisory Tax Exempt. It trades about 0.32 of its potential returns per unit of risk. Brown Advisory Tax Exempt is currently generating about 0.16 per unit of risk. If you would invest  5,792  in American Mutual Fund on September 3, 2024 and sell it today you would earn a total of  232.00  from holding American Mutual Fund or generate 4.01% return on investment over 90 days.

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

American Mutual Fund  vs.  Brown Advisory Tax Exempt

American Mutual

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Advisory Tax

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Tax Exempt are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Brown Advisory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Mutual and Brown Advisory

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

The idea behind American Mutual Fund and Brown Advisory Tax Exempt 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..