Correlation Between Western Asset and Brown Advisory
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Brown Advisory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Diversified and Brown Advisory Flexible, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Brown Advisory.
Diversification Opportunities for Western Asset and Brown Advisory
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Brown is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Brown Advisory Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Flexible and Western Asset 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 Western Asset Diversified 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 Flexible has no effect on the direction of Western Asset i.e., Western Asset and Brown Advisory go up and down completely randomly.
Pair Corralation between Western Asset and Brown Advisory
Assuming the 90 days horizon Western Asset is expected to generate 1.46 times less return on investment than Brown Advisory. But when comparing it to its historical volatility, Western Asset Diversified is 2.28 times less risky than Brown Advisory. It trades about 0.16 of its potential returns per unit of risk. Brown Advisory Flexible is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,382 in Brown Advisory Flexible on September 14, 2024 and sell it today you would earn a total of 53.00 from holding Brown Advisory Flexible or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Brown Advisory Flexible
Performance |
| Timeline |
| Western Asset Diversified |
| Brown Advisory Flexible |
Western Asset and Brown Advisory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Brown Advisory
The main advantage of trading using opposite Western Asset and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
| Brown Advisory vs. Western Asset Diversified | Brown Advisory vs. Locorr Market Trend | Brown Advisory vs. Ab All Market | Brown Advisory vs. T Rowe Price |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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