Correlation Between Brighthouse Financial and XOMA
Can any of the company-specific risk be diversified away by investing in both Brighthouse Financial and XOMA 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 XOMA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brighthouse Financial and XOMA Corporation, you can compare the effects of market volatilities on Brighthouse Financial and XOMA 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 XOMA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brighthouse Financial and XOMA.
Diversification Opportunities for Brighthouse Financial and XOMA
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brighthouse and XOMA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA 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 XOMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and XOMA go up and down completely randomly.
Pair Corralation between Brighthouse Financial and XOMA
Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the XOMA. In addition to that, Brighthouse Financial is 6.08 times more volatile than XOMA Corporation. It trades about -0.16 of its total potential returns per unit of risk. XOMA Corporation is currently generating about -0.36 per unit of volatility. If you would invest 2,564 in XOMA Corporation on August 24, 2024 and sell it today you would lose (31.00) from holding XOMA Corporation or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brighthouse Financial vs. XOMA Corp.
Performance |
| Timeline |
| Brighthouse Financial |
| XOMA |
Brighthouse Financial and XOMA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brighthouse Financial and XOMA
The main advantage of trading using opposite Brighthouse Financial and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brighthouse Financial position performs unexpectedly, XOMA 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 XOMA will offset losses from the drop in XOMA's long position.| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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