Correlation Between Nasdaq-100(r) and Brown Advisory

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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 Nasdaq-100(r) and Brown Advisory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Brown Advisory Small Cap, you can compare the effects of market volatilities on Nasdaq-100(r) 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 Nasdaq-100(r) with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Brown Advisory.

Diversification Opportunities for Nasdaq-100(r) and Brown Advisory

0.82

Correlation Coefficient

Nasdaq-100(r)  Brown Advisory

Very poor diversification

The 3 months correlation between Nasdaq-100(r) and Brown is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Brown Advisory Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Small and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy 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 Small has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Brown Advisory go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Brown Advisory

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 1.58 times more return on investment than Brown Advisory. However, Nasdaq-100(r) is 1.58 times more volatile than Brown Advisory Small Cap. It trades about 0.15 of its potential returns per unit of risk. Brown Advisory Small Cap is currently generating about 0.14 per unit of risk. If you would invest  48,630  in Nasdaq 100 2x Strategy on September 3, 2024 and sell it today you would earn a total of  9,412  from holding Nasdaq 100 2x Strategy or generate 19.35% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Brown Advisory Small Cap

Nasdaq 100 2x

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq-100(r) showed solid returns over the last few months and may actually be approaching a breakup point.

Brown Advisory Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Small Cap 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 Nasdaq-100(r) and Brown Advisory

The main advantage of trading using opposite Nasdaq-100(r) and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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 Nasdaq 100 2x Strategy and Brown Advisory Small Cap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.