Correlation Between Willis Towers and Brown Brown

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

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

Diversification Opportunities for Willis Towers and Brown Brown

0.93

Correlation Coefficient

Willis Towers  Brown Brown

Almost no diversification

The 3 months correlation between Willis and Brown is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Willis Towers Watson and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown and Willis Towers 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 Willis Towers Watson 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 Willis Towers i.e., Willis Towers and Brown Brown go up and down completely randomly.

Pair Corralation between Willis Towers and Brown Brown

Considering the 90-day investment horizon Willis Towers is expected to generate 2.09 times less return on investment than Brown Brown. In addition to that, Willis Towers is 1.07 times more volatile than Brown Brown. It trades about 0.05 of its total potential returns per unit of risk. Brown Brown is currently generating about 0.12 per unit of volatility. If you would invest  5,741  in Brown Brown on September 4, 2024 and sell it today you would earn a total of  5,422  from holding Brown Brown or generate 94.44% return on investment over 90 days.

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

Willis Towers Watson  vs.  Brown Brown

Willis Towers Watson

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 10 (%) 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 January 2025.

Brown Brown

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brown Brown is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Willis Towers and Brown Brown

The main advantage of trading using opposite Willis Towers and Brown Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willis Towers 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 Willis Towers Watson 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.