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

0.7

Correlation Coefficient

Willis Towers  Brown Brown

Poor diversification

The 3 months correlation between Willis and Brown is 0.7. 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

Assuming the 90 days horizon Willis Towers Watson is expected to generate 0.88 times more return on investment than Brown Brown. However, Willis Towers Watson is 1.14 times less risky than Brown Brown. It trades about 0.18 of its potential returns per unit of risk. Brown Brown is currently generating about 0.03 per unit of risk. If you would invest  26,722  in Willis Towers Watson on October 15, 2024 and sell it today you would earn a total of  3,678  from holding Willis Towers Watson or generate 13.76% return on investment over 90 days.

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

Willis Towers Watson  vs.  Brown Brown

Willis Towers Watson

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Willis Towers reported solid returns over the last few months and may actually be approaching a breakup point.

Brown Brown

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Brown Brown is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..