Correlation Between American Balanced and Brown Advisory
Can any of the company-specific risk be diversified away by investing in both American Balanced 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 American Balanced and Brown Advisory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Brown Advisory Equity, you can compare the effects of market volatilities on American Balanced 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 American Balanced with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Brown Advisory.
Diversification Opportunities for American Balanced and Brown Advisory
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Brown is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Brown Advisory Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Equity and American Balanced 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 American Balanced 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 Equity has no effect on the direction of American Balanced i.e., American Balanced and Brown Advisory go up and down completely randomly.
Pair Corralation between American Balanced and Brown Advisory
Assuming the 90 days horizon American Balanced is expected to generate 1.02 times less return on investment than Brown Advisory. But when comparing it to its historical volatility, American Balanced is 1.33 times less risky than Brown Advisory. It trades about 0.07 of its potential returns per unit of risk. Brown Advisory Equity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,349 in Brown Advisory Equity on October 23, 2024 and sell it today you would earn a total of 65.00 from holding Brown Advisory Equity or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 24.29% |
| Values | Daily Returns |
American Balanced vs. Brown Advisory Equity
Performance |
| Timeline |
| American Balanced |
| Brown Advisory Equity |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Balanced and Brown Advisory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Brown Advisory
The main advantage of trading using opposite American Balanced and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced 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.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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