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

0.34

Correlation Coefficient

Arthur J  Brown Brown

Weak diversification

The 3 months correlation between Arthur and Brown is 0.34. 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 3.12 times less return on investment than Brown Brown. But when comparing it to its historical volatility, Arthur J Gallagher is 1.19 times less risky than Brown Brown. It trades about 0.1 of its potential returns per unit of risk. Brown Brown is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  10,579  in Brown Brown on August 15, 2024 and sell it today you would earn a total of  663.00  from holding Brown Brown or generate 6.27% return on investment over 90 days.

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

Arthur J Gallagher  vs.  Brown Brown

Arthur J Gallagher

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Arthur J is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Brown Brown

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Brown are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brown Brown may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

The idea behind Arthur J Gallagher 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.