Correlation Between Brown Capital and Federated

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

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

Diversification Opportunities for Brown Capital and Federated

-0.86

Correlation Coefficient

Brown Capital  Federated

Pay attention - limited upside

The 3 months correlation between Brown and Federated is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Brown Capital and Federated U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated U S and Brown Capital 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 The Brown Capital are associated (or correlated) with Federated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated U S has no effect on the direction of Brown Capital i.e., Brown Capital and Federated go up and down completely randomly.

Pair Corralation between Brown Capital and Federated

Assuming the 90 days horizon The Brown Capital is expected to under-perform the Federated. In addition to that, Brown Capital is 6.7 times more volatile than Federated U S. It trades about -0.19 of its total potential returns per unit of risk. Federated U S is currently generating about 0.17 per unit of volatility. If you would invest  953.00  in Federated U S on December 29, 2024 and sell it today you would earn a total of  20.00  from holding Federated U S or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

The Brown Capital  vs.  Federated U S

Brown Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Brown Capital 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 forward 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.

Federated U S

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated U S are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Federated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brown Capital and Federated

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

The idea behind The Brown Capital and Federated U S 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.