Correlation Between Brown Advisory and Brown Capital

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

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

Diversification Opportunities for Brown Advisory and Brown Capital

0.33

Correlation Coefficient

Brown Advisory  Brown Capital

Weak diversification

The 3 months correlation between Brown and Brown is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brown Advisory Sustainable and The Brown Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Capital and Brown Advisory 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 Brown Advisory Sustainable are associated (or correlated) with Brown Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Capital has no effect on the direction of Brown Advisory i.e., Brown Advisory and Brown Capital go up and down completely randomly.

Pair Corralation between Brown Advisory and Brown Capital

Assuming the 90 days horizon Brown Advisory Sustainable is expected to generate 1.23 times more return on investment than Brown Capital. However, Brown Advisory is 1.23 times more volatile than The Brown Capital. It trades about 0.13 of its potential returns per unit of risk. The Brown Capital is currently generating about 0.06 per unit of risk. If you would invest  5,455  in Brown Advisory Sustainable on September 13, 2024 and sell it today you would earn a total of  445.00  from holding Brown Advisory Sustainable or generate 8.16% return on investment over 90 days.

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

Brown Advisory Sustainable  vs.  The Brown Capital

Brown Advisory Susta

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Sustainable are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Brown Advisory may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brown Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Brown Capital are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Brown Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brown Advisory and Brown Capital

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

The idea behind Brown Advisory Sustainable and The Brown Capital 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.