Correlation Between Highland Long/short and Brown Advisory

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

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

Diversification Opportunities for Highland Long/short and Brown Advisory

0.71

Correlation Coefficient

Highland Long/short  Brown Advisory

Poor diversification

The 3 months correlation between Highland and Brown is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Brown Advisory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Funds and Highland Long/short 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 Highland Longshort Healthcare 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 Funds has no effect on the direction of Highland Long/short i.e., Highland Long/short and Brown Advisory go up and down completely randomly.

Pair Corralation between Highland Long/short and Brown Advisory

Assuming the 90 days horizon Highland Long/short is expected to generate 3.94 times less return on investment than Brown Advisory. But when comparing it to its historical volatility, Highland Longshort Healthcare is 5.45 times less risky than Brown Advisory. It trades about 0.18 of its potential returns per unit of risk. Brown Advisory Funds is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Brown Advisory Funds on September 4, 2024 and sell it today you would earn a total of  97.00  from holding Brown Advisory Funds or generate 9.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Highland Longshort Healthcare  vs.  Brown Advisory Funds

Highland Long/short

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Long/short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Advisory Funds

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Funds 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.

Pair Trading with Highland Long/short and Brown Advisory

The main advantage of trading using opposite Highland Long/short and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short 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 Highland Longshort Healthcare and Brown Advisory Funds 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.