Correlation Between Exxon and Brown Advisory

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Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and Brown Advisory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Brown Advisory Equity, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Brown Advisory.

Diversification Opportunities for Exxon and Brown Advisory

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Exxon and Brown is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Brown Advisory Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Equity and Exxon 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 Exxon Mobil Corp 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 Equity has no effect on the direction of Exxon i.e., Exxon and Brown Advisory go up and down completely randomly.

Pair Corralation between Exxon and Brown Advisory

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.69 times more return on investment than Brown Advisory. However, Exxon is 1.69 times more volatile than Brown Advisory Equity. It trades about 0.09 of its potential returns per unit of risk. Brown Advisory Equity is currently generating about -0.02 per unit of risk. If you would invest  7,752  in Exxon Mobil Corp on August 31, 2022 and sell it today you would earn a total of  3,302  from holding Exxon Mobil Corp or generate 42.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.52%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Brown Advisory Equity

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Brown Advisory Equity 
Brown Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Brown Advisory Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Brown Price Channel

Exxon and Brown Advisory Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Brown Advisory

The main advantage of trading using opposite Exxon and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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.
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The idea behind Exxon Mobil Corp and Brown Advisory Equity 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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