Correlation Between Brighthouse Financial and MetLife Preferred
Can any of the company-specific risk be diversified away by investing in both Brighthouse Financial and MetLife Preferred 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 MetLife Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brighthouse Financial and MetLife Preferred Stock, you can compare the effects of market volatilities on Brighthouse Financial and MetLife Preferred 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 MetLife Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brighthouse Financial and MetLife Preferred.
Diversification Opportunities for Brighthouse Financial and MetLife Preferred
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brighthouse and MetLife is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and MetLife Preferred Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife Preferred Stock 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 MetLife Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife Preferred Stock has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and MetLife Preferred go up and down completely randomly.
Pair Corralation between Brighthouse Financial and MetLife Preferred
Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the MetLife Preferred. In addition to that, Brighthouse Financial is 1.49 times more volatile than MetLife Preferred Stock. It trades about -0.14 of its total potential returns per unit of risk. MetLife Preferred Stock is currently generating about -0.16 per unit of volatility. If you would invest 2,482 in MetLife Preferred Stock on August 27, 2024 and sell it today you would lose (53.00) from holding MetLife Preferred Stock or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brighthouse Financial vs. MetLife Preferred Stock
Performance |
| Timeline |
| Brighthouse Financial |
| MetLife Preferred Stock |
Brighthouse Financial and MetLife Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brighthouse Financial and MetLife Preferred
The main advantage of trading using opposite Brighthouse Financial and MetLife Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brighthouse Financial position performs unexpectedly, MetLife Preferred 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 MetLife Preferred will offset losses from the drop in MetLife Preferred's long position.The idea behind Brighthouse Financial and MetLife Preferred Stock 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.| MetLife Preferred vs. Brighthouse Financial | MetLife Preferred vs. Brighthouse Financial | MetLife Preferred vs. Morgan Stanley |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Global Correlations Find global opportunities by holding instruments from different markets |