Correlation Between American Funds and Brown Advisory
Can any of the company-specific risk be diversified away by investing in both American Funds 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 Funds 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 Funds New and Brown Advisory Global, you can compare the effects of market volatilities on American Funds 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 Funds with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Brown Advisory.
Diversification Opportunities for American Funds and Brown Advisory
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Brown is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Brown Advisory Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Global and American Funds 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 Funds New 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 Global has no effect on the direction of American Funds i.e., American Funds and Brown Advisory go up and down completely randomly.
Pair Corralation between American Funds and Brown Advisory
Assuming the 90 days horizon American Funds New is expected to generate 1.18 times more return on investment than Brown Advisory. However, American Funds is 1.18 times more volatile than Brown Advisory Global. It trades about 0.05 of its potential returns per unit of risk. Brown Advisory Global is currently generating about -0.07 per unit of risk. If you would invest 6,408 in American Funds New on November 27, 2024 and sell it today you would earn a total of 38.00 from holding American Funds New or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds New vs. Brown Advisory Global
Performance |
| Timeline |
| American Funds New |
| Brown Advisory Global |
American Funds and Brown Advisory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Brown Advisory
The main advantage of trading using opposite American Funds and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 Funds vs. Advent Claymore Convertible | American Funds vs. Lord Abbett Vertible | American Funds vs. Invesco Vertible Securities | American Funds vs. Harbor Vertible Securities |
| Brown Advisory vs. Brown Advisory Sustainable | Brown Advisory vs. Brown Advisory Flexible | Brown Advisory vs. Brown Advisory Growth | Brown Advisory vs. Brown Advisory Small Cap |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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