Correlation Between Brandes International and Brown Advisory

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

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

Diversification Opportunities for Brandes International and Brown Advisory

-0.07

Correlation Coefficient

Brandes International  Brown Advisory

Good diversification

The 3 months correlation between Brandes and Brown is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Brandes International Small and Brown Advisory Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Small and Brandes International 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 Brandes International Small 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 Small has no effect on the direction of Brandes International i.e., Brandes International and Brown Advisory go up and down completely randomly.

Pair Corralation between Brandes International and Brown Advisory

Assuming the 90 days horizon Brandes International Small is expected to generate 0.6 times more return on investment than Brown Advisory. However, Brandes International Small is 1.66 times less risky than Brown Advisory. It trades about 0.16 of its potential returns per unit of risk. Brown Advisory Small Cap is currently generating about 0.05 per unit of risk. If you would invest  1,090  in Brandes International Small on September 4, 2024 and sell it today you would earn a total of  806.00  from holding Brandes International Small or generate 73.94% return on investment over 90 days.

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

Brandes International Small  vs.  Brown Advisory Small Cap

Brandes International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brandes International Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Brandes International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Advisory Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Brown Advisory may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brandes International and Brown Advisory

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

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.