Correlation Between Cutler Equity and Brown Advisory

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

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

Diversification Opportunities for Cutler Equity and Brown Advisory

0.76

Correlation Coefficient

Cutler Equity  Brown Advisory

Poor diversification

The 3 months correlation between Cutler and Brown is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cutler Equity and Brown Advisory Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Flexible and Cutler Equity 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 Cutler Equity 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 Flexible has no effect on the direction of Cutler Equity i.e., Cutler Equity and Brown Advisory go up and down completely randomly.

Pair Corralation between Cutler Equity and Brown Advisory

Assuming the 90 days horizon Cutler Equity is expected to under-perform the Brown Advisory. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cutler Equity is 1.06 times less risky than Brown Advisory. The mutual fund trades about -0.37 of its potential returns per unit of risk. The Brown Advisory Flexible is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  4,474  in Brown Advisory Flexible on October 7, 2024 and sell it today you would lose (315.00) from holding Brown Advisory Flexible or give up 7.04% of portfolio value over 90 days.

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

Cutler Equity  vs.  Brown Advisory Flexible

Cutler Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Brown Advisory Flexible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brown Advisory Flexible has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental 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 Cutler Equity and Brown Advisory

The main advantage of trading using opposite Cutler Equity and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cutler Equity 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 Cutler Equity and Brown Advisory Flexible 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.