Correlation Between Brown Brown and Willis Towers

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

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

Diversification Opportunities for Brown Brown and Willis Towers

0.83

Correlation Coefficient

Brown Brown  Willis Towers

Very poor diversification

The 3 months correlation between Brown and Willis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Brown Brown and Willis Towers Watson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Towers Watson and Brown Brown 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 Brown Brown are associated (or correlated) with Willis Towers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Towers Watson has no effect on the direction of Brown Brown i.e., Brown Brown and Willis Towers go up and down completely randomly.

Pair Corralation between Brown Brown and Willis Towers

Considering the 90-day investment horizon Brown Brown is expected to generate 0.9 times more return on investment than Willis Towers. However, Brown Brown is 1.11 times less risky than Willis Towers. It trades about 0.29 of its potential returns per unit of risk. Willis Towers Watson is currently generating about 0.11 per unit of risk. If you would invest  10,274  in Brown Brown on December 27, 2024 and sell it today you would earn a total of  1,903  from holding Brown Brown or generate 18.52% return on investment over 90 days.

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

Brown Brown  vs.  Willis Towers Watson

Brown Brown

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Brown Brown displayed solid returns over the last few months and may actually be approaching a breakup point.

Willis Towers Watson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Willis Towers may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Brown Brown and Willis Towers

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

The idea behind Brown Brown and Willis Towers Watson 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.