Correlation Between Aqr Large and Brown Advisory

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

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

Diversification Opportunities for Aqr Large and Brown Advisory

0.45

Correlation Coefficient

Aqr Large  Brown Advisory

Very weak diversification

The 3 months correlation between Aqr and Brown is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and Brown Advisory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory and Aqr Large 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 Aqr Large Cap 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 has no effect on the direction of Aqr Large i.e., Aqr Large and Brown Advisory go up and down completely randomly.

Pair Corralation between Aqr Large and Brown Advisory

Assuming the 90 days horizon Aqr Large is expected to generate 1.28 times less return on investment than Brown Advisory. In addition to that, Aqr Large is 1.51 times more volatile than Brown Advisory . It trades about 0.04 of its total potential returns per unit of risk. Brown Advisory is currently generating about 0.08 per unit of volatility. If you would invest  1,065  in Brown Advisory on December 4, 2024 and sell it today you would earn a total of  391.00  from holding Brown Advisory or generate 36.71% return on investment over 90 days.

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

Aqr Large Cap  vs.  Brown Advisory

Aqr Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqr Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Brown Advisory

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Brown Advisory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aqr Large and Brown Advisory

The main advantage of trading using opposite Aqr Large and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Large 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 Aqr Large Cap and Brown Advisory 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.