Correlation Between Cliffwater Corporate and Brown Capital

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

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

Diversification Opportunities for Cliffwater Corporate and Brown Capital

0.43

Correlation Coefficient

Cliffwater Corporate  Brown Capital

Very weak diversification

The 3 months correlation between Cliffwater and Brown is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cliffwater Corporate Lending and The Brown Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Capital and Cliffwater Corporate 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 Cliffwater Corporate Lending 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 Cliffwater Corporate i.e., Cliffwater Corporate and Brown Capital go up and down completely randomly.

Pair Corralation between Cliffwater Corporate and Brown Capital

Assuming the 90 days horizon Cliffwater Corporate Lending is expected to generate 0.01 times more return on investment than Brown Capital. However, Cliffwater Corporate Lending is 98.5 times less risky than Brown Capital. It trades about 0.81 of its potential returns per unit of risk. The Brown Capital is currently generating about -0.05 per unit of risk. If you would invest  1,059  in Cliffwater Corporate Lending on September 13, 2024 and sell it today you would earn a total of  27.00  from holding Cliffwater Corporate Lending or generate 2.55% return on investment over 90 days.

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

Cliffwater Corporate Lending  vs.  The Brown Capital

Cliffwater Corporate

Risk-Adjusted Performance

63 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Cliffwater Corporate Lending are ranked lower than 63 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cliffwater Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Brown Capital has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cliffwater Corporate and Brown Capital

The main advantage of trading using opposite Cliffwater Corporate and Brown Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cliffwater Corporate 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 Cliffwater Corporate Lending 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.