Correlation Between Wasatch Core and Brown Advisory

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

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

Diversification Opportunities for Wasatch Core and Brown Advisory

0.94

Correlation Coefficient

Wasatch Core  Brown Advisory

Almost no diversification

The 3 months correlation between Wasatch and Brown is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch E Growth and Brown Advisory Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Susta and Wasatch Core 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 Wasatch E Growth 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 Susta has no effect on the direction of Wasatch Core i.e., Wasatch Core and Brown Advisory go up and down completely randomly.

Pair Corralation between Wasatch Core and Brown Advisory

Assuming the 90 days horizon Wasatch E Growth is expected to generate 1.13 times more return on investment than Brown Advisory. However, Wasatch Core is 1.13 times more volatile than Brown Advisory Sustainable. It trades about 0.24 of its potential returns per unit of risk. Brown Advisory Sustainable is currently generating about 0.15 per unit of risk. If you would invest  9,266  in Wasatch E Growth on September 3, 2024 and sell it today you would earn a total of  1,645  from holding Wasatch E Growth or generate 17.75% return on investment over 90 days.

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

Wasatch E Growth  vs.  Brown Advisory Sustainable

Wasatch E Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch E Growth are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wasatch Core showed solid returns over the last few months and may actually be approaching a breakup point.

Brown Advisory Susta

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Sustainable are ranked lower than 11 (%) 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 Wasatch Core and Brown Advisory

The main advantage of trading using opposite Wasatch Core and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Core 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 Wasatch E Growth and Brown Advisory Sustainable 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.