Correlation Between American Equity and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both American Equity 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 American Equity and Brighthouse Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Equity Investment and Brighthouse Financial, you can compare the effects of market volatilities on American Equity 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 American Equity with a short position of Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and Brighthouse Financial.
Diversification Opportunities for American Equity and Brighthouse Financial
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Brighthouse is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and American Equity 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 American Equity Investment 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 American Equity i.e., American Equity and Brighthouse Financial go up and down completely randomly.
Pair Corralation between American Equity and Brighthouse Financial
Considering the 90-day investment horizon American Equity is expected to generate 3.66 times less return on investment than Brighthouse Financial. But when comparing it to its historical volatility, American Equity Investment is 4.11 times less risky than Brighthouse Financial. It trades about 0.07 of its potential returns per unit of risk. Brighthouse Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,903 in Brighthouse Financial on January 25, 2024 and sell it today you would earn a total of 87.00 from holding Brighthouse Financial or generate 1.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Equity Investment vs. Brighthouse Financial
Performance |
Timeline |
American Equity Inve |
Brighthouse Financial |
American Equity and Brighthouse Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Equity and Brighthouse Financial
The main advantage of trading using opposite American Equity and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity 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.American Equity vs. MetLife Preferred Stock | American Equity vs. National Western Life | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock |
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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 the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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