Correlation Between Arthur J and Brown Brown
Can any of the company-specific risk be diversified away by investing in both Arthur J 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 Arthur J and Brown Brown into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arthur J Gallagher and Brown Brown, you can compare the effects of market volatilities on Arthur J 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 Arthur J with a short position of Brown Brown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arthur J and Brown Brown.
Diversification Opportunities for Arthur J and Brown Brown
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arthur and Brown is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown and Arthur J 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 Arthur J Gallagher 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 Arthur J i.e., Arthur J and Brown Brown go up and down completely randomly.
Pair Corralation between Arthur J and Brown Brown
Considering the 90-day investment horizon Arthur J is expected to generate 4.26 times less return on investment than Brown Brown. But when comparing it to its historical volatility, Arthur J Gallagher is 1.04 times less risky than Brown Brown. It trades about 0.03 of its potential returns per unit of risk. Brown Brown is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 6,654 in Brown Brown on January 20, 2024 and sell it today you would earn a total of 1,563 from holding Brown Brown or generate 23.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Arthur J Gallagher vs. Brown Brown
Performance |
| Timeline |
| Arthur J Gallagher |
| Brown Brown |
Arthur J and Brown Brown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arthur J and Brown Brown
The main advantage of trading using opposite Arthur J and Brown Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arthur J 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.| Arthur J vs. Erie Indemnity | Arthur J vs. Crawford Company | Arthur J vs. Crawford Company | Arthur J vs. CorVel Corp |
| Brown Brown vs. Erie Indemnity | Brown Brown vs. Crawford Company | Brown Brown vs. Crawford Company | Brown Brown vs. CorVel Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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