Correlation Between Brighthouse Financial and Prudential PLC
Can any of the company-specific risk be diversified away by investing in both Brighthouse Financial and Prudential PLC 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 Prudential PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brighthouse Financial and Prudential PLC ADR, you can compare the effects of market volatilities on Brighthouse Financial and Prudential PLC 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 Prudential PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brighthouse Financial and Prudential PLC.
Diversification Opportunities for Brighthouse Financial and Prudential PLC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brighthouse and Prudential is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and Prudential PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential PLC ADR 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 Prudential PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential PLC ADR has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and Prudential PLC go up and down completely randomly.
Pair Corralation between Brighthouse Financial and Prudential PLC
Assuming the 90 days horizon Brighthouse Financial is expected to generate 1.03 times more return on investment than Prudential PLC. However, Brighthouse Financial is 1.03 times more volatile than Prudential PLC ADR. It trades about 0.01 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about -0.02 per unit of risk. If you would invest 2,301 in Brighthouse Financial on October 22, 2024 and sell it today you would lose (2.00) from holding Brighthouse Financial or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Brighthouse Financial vs. Prudential PLC ADR
Performance |
| Timeline |
| Brighthouse Financial |
| Prudential PLC ADR |
Brighthouse Financial and Prudential PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brighthouse Financial and Prudential PLC
The main advantage of trading using opposite Brighthouse Financial and Prudential PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brighthouse Financial position performs unexpectedly, Prudential PLC 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 Prudential PLC will offset losses from the drop in Prudential PLC's long position.| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Fifth Third Bancorp | Brighthouse Financial vs. First Citizens BancShares |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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