Correlation Between Vanguard Health and Brown Advisory

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

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

Diversification Opportunities for Vanguard Health and Brown Advisory

-0.25

Correlation Coefficient

Vanguard Health  Brown Advisory

Very good diversification

The 3 months correlation between Vanguard and Brown is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Brown Advisory Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Mid and Vanguard Health 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 Vanguard Health Care 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 Mid has no effect on the direction of Vanguard Health i.e., Vanguard Health and Brown Advisory go up and down completely randomly.

Pair Corralation between Vanguard Health and Brown Advisory

Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Brown Advisory. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Health Care is 1.22 times less risky than Brown Advisory. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Brown Advisory Mid Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,217  in Brown Advisory Mid Cap on October 9, 2024 and sell it today you would earn a total of  487.00  from holding Brown Advisory Mid Cap or generate 40.02% return on investment over 90 days.

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

Vanguard Health Care  vs.  Brown Advisory Mid Cap

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Brown Advisory Mid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Mid Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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 Vanguard Health and Brown Advisory

The main advantage of trading using opposite Vanguard Health and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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 Vanguard Health Care and Brown Advisory Mid 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.