Correlation Between Multifactor and Brown Advisory

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

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

Diversification Opportunities for Multifactor and Brown Advisory

0.76

Correlation Coefficient

Multifactor  Brown Advisory

Poor diversification

The 3 months correlation between Multifactor and Brown is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Brown Advisory Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Small and Multifactor 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 Multifactor Equity Fund 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 Small has no effect on the direction of Multifactor i.e., Multifactor and Brown Advisory go up and down completely randomly.

Pair Corralation between Multifactor and Brown Advisory

Assuming the 90 days horizon Multifactor Equity Fund is expected to generate 0.72 times more return on investment than Brown Advisory. However, Multifactor Equity Fund is 1.39 times less risky than Brown Advisory. It trades about 0.2 of its potential returns per unit of risk. Brown Advisory Small Cap is currently generating about 0.0 per unit of risk. If you would invest  1,505  in Multifactor Equity Fund on May 12, 2025 and sell it today you would earn a total of  131.00  from holding Multifactor Equity Fund or generate 8.7% return on investment over 90 days.

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

Multifactor Equity Fund  vs.  Brown Advisory Small Cap

Multifactor Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multifactor Equity Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multifactor may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Brown Advisory Small

Risk-Adjusted Performance

Weakest

Over the last 90 days Brown Advisory Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Brown Advisory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multifactor and Brown Advisory

The main advantage of trading using opposite Multifactor and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multifactor 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 Multifactor Equity Fund and Brown Advisory Small Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.