Correlation Between Absolute Convertible and Brown Advisory

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

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

Diversification Opportunities for Absolute Convertible and Brown Advisory

0.29

Correlation Coefficient

Absolute Convertible  Brown Advisory

Modest diversification

The 3 months correlation between Absolute and Brown is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Brown Advisory Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Mid and Absolute Convertible 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 Absolute Convertible Arbitrage 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 Mid has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Brown Advisory go up and down completely randomly.

Pair Corralation between Absolute Convertible and Brown Advisory

Assuming the 90 days horizon Absolute Convertible is expected to generate 4.36 times less return on investment than Brown Advisory. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 7.91 times less risky than Brown Advisory. It trades about 0.14 of its potential returns per unit of risk. Brown Advisory Mid Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,235  in Brown Advisory Mid Cap on October 11, 2024 and sell it today you would earn a total of  495.00  from holding Brown Advisory Mid Cap or generate 40.08% return on investment over 90 days.

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

Absolute Convertible Arbitrage  vs.  Brown Advisory Mid Cap

Absolute Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Convertible Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Absolute Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Advisory Mid

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Mid Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary 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 Absolute Convertible and Brown Advisory

The main advantage of trading using opposite Absolute Convertible and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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 Absolute Convertible Arbitrage and Brown Advisory Mid Cap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .