Correlation Between Steadfast Group and Brown Brown

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

By analyzing existing cross correlation between Steadfast Group Limited and Brown Brown, you can compare the effects of market volatilities on Steadfast Group and Brown Brown 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 Steadfast Group with a short position of Brown Brown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steadfast Group and Brown Brown.

Diversification Opportunities for Steadfast Group and Brown Brown

0.55

Correlation Coefficient

Steadfast Group  Brown Brown

Very weak diversification

The 3 months correlation between Steadfast and Brown is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Steadfast Group Limited and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown and Steadfast Group 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 Steadfast Group Limited are associated (or correlated) with Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of Steadfast Group i.e., Steadfast Group and Brown Brown go up and down completely randomly.

Pair Corralation between Steadfast Group and Brown Brown

Assuming the 90 days horizon Steadfast Group is expected to generate 4.34 times less return on investment than Brown Brown. In addition to that, Steadfast Group is 1.51 times more volatile than Brown Brown. It trades about 0.02 of its total potential returns per unit of risk. Brown Brown is currently generating about 0.13 per unit of volatility. If you would invest  7,010  in Brown Brown on October 24, 2024 and sell it today you would earn a total of  3,120  from holding Brown Brown or generate 44.51% return on investment over 90 days.

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

Steadfast Group Limited  vs.  Brown Brown

Steadfast Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steadfast Group Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Steadfast Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Brown Brown

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Brown Brown is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Steadfast Group and Brown Brown

The main advantage of trading using opposite Steadfast Group and Brown Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steadfast Group position performs unexpectedly, Brown Brown 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 Brown will offset losses from the drop in Brown Brown's long position.

The idea behind Steadfast Group Limited and Brown Brown 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.