Correlation Between Citizens and Brighthouse Financial

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

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

Diversification Opportunities for Citizens and Brighthouse Financial

-0.73

Correlation Coefficient

Citizens  Brighthouse Financial

Pay attention - limited upside

The 3 months correlation between Citizens and Brighthouse is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citizens and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Citizens 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 Citizens are associated (or correlated) with Brighthouse Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brighthouse Financial has no effect on the direction of Citizens i.e., Citizens and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Citizens and Brighthouse Financial

Considering the 90-day investment horizon Citizens is expected to generate 1.87 times more return on investment than Brighthouse Financial. However, Citizens is 1.87 times more volatile than Brighthouse Financial. It trades about 0.26 of its potential returns per unit of risk. Brighthouse Financial is currently generating about -0.14 per unit of risk. If you would invest  218.00  in Citizens on March 2, 2024 and sell it today you would earn a total of  65.00  from holding Citizens or generate 29.82% return on investment over 90 days.

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

Citizens  vs.  Brighthouse Financial

Citizens

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Citizens may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Brighthouse Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brighthouse Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Brighthouse Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citizens and Brighthouse Financial

The main advantage of trading using opposite Citizens and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens position performs unexpectedly, Brighthouse Financial 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 Brighthouse Financial will offset losses from the drop in Brighthouse Financial's long position.

The idea behind Citizens and Brighthouse Financial 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.