Correlation Between Investec Global and Brown Advisory

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

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

Diversification Opportunities for Investec Global and Brown Advisory

0.53

Correlation Coefficient

Investec Global  Brown Advisory

Very weak diversification

The 3 months correlation between Investec and BROWN is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Investec Global Franchise and Brown Advisory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory and Investec Global 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 Investec Global Franchise 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 has no effect on the direction of Investec Global i.e., Investec Global and Brown Advisory go up and down completely randomly.

Pair Corralation between Investec Global and Brown Advisory

Assuming the 90 days horizon Investec Global is expected to generate 6.98 times less return on investment than Brown Advisory. But when comparing it to its historical volatility, Investec Global Franchise is 1.41 times less risky than Brown Advisory. It trades about 0.07 of its potential returns per unit of risk. Brown Advisory is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,306  in Brown Advisory on December 20, 2024 and sell it today you would earn a total of  280.00  from holding Brown Advisory or generate 21.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Investec Global Franchise  vs.  Brown Advisory

Investec Global Franchise

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Global Franchise are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Investec Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Advisory

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Brown Advisory showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investec Global and Brown Advisory

The main advantage of trading using opposite Investec Global and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec Global 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 Investec Global Franchise and Brown Advisory 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.