Correlation Between Brighthouse Financial and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Brighthouse Financial and CMS Energy 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 Brighthouse Financial and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brighthouse Financial and CMS Energy Corp, you can compare the effects of market volatilities on Brighthouse Financial and CMS Energy 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 Brighthouse Financial with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brighthouse Financial and CMS Energy.
Diversification Opportunities for Brighthouse Financial and CMS Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brighthouse and CMS is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and CMS Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy Corp and Brighthouse Financial 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 Brighthouse Financial are associated (or correlated) with CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy Corp has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and CMS Energy go up and down completely randomly.
Pair Corralation between Brighthouse Financial and CMS Energy
Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the CMS Energy. In addition to that, Brighthouse Financial is 1.76 times more volatile than CMS Energy Corp. It trades about -0.08 of its total potential returns per unit of risk. CMS Energy Corp is currently generating about -0.03 per unit of volatility. If you would invest 2,459 in CMS Energy Corp on August 31, 2024 and sell it today you would lose (7.00) from holding CMS Energy Corp or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brighthouse Financial vs. CMS Energy Corp
Performance |
| Timeline |
| Brighthouse Financial |
| CMS Energy Corp |
Brighthouse Financial and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brighthouse Financial and CMS Energy
The main advantage of trading using opposite Brighthouse Financial and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brighthouse Financial position performs unexpectedly, CMS Energy 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 CMS Energy will offset losses from the drop in CMS Energy's long position.| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Unum Group | Brighthouse Financial vs. Argo Group 65 | Brighthouse Financial vs. Arch Capital Group |
| CMS Energy vs. Southern Company Series | CMS Energy vs. DTE Energy Co | CMS Energy vs. Affiliated Managers Group, | CMS Energy vs. United States Cellular |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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