Correlation Between Nasdaq and Brown Brown

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

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

Diversification Opportunities for Nasdaq and Brown Brown

0.88

Correlation Coefficient

Nasdaq  Brown Brown

Very poor diversification

The 3 months correlation between Nasdaq and Brown is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of Nasdaq i.e., Nasdaq and Brown Brown go up and down completely randomly.

Pair Corralation between Nasdaq and Brown Brown

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.9 times more return on investment than Brown Brown. However, Nasdaq Inc is 1.11 times less risky than Brown Brown. It trades about 0.19 of its potential returns per unit of risk. Brown Brown is currently generating about 0.11 per unit of risk. If you would invest  5,911  in Nasdaq Inc on September 29, 2024 and sell it today you would earn a total of  1,931  from holding Nasdaq Inc or generate 32.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Nasdaq Inc  vs.  Brown Brown

Nasdaq Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brown Brown

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brown Brown may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Brown Brown

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

The idea behind Nasdaq Inc and Brown Brown 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.