Correlation Between BP PLC and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both BP PLC 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 BP PLC and Brighthouse Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC ADR and Brighthouse Financial, you can compare the effects of market volatilities on BP PLC 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 BP PLC with a short position of Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Brighthouse Financial.
Diversification Opportunities for BP PLC and Brighthouse Financial
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BP PLC and Brighthouse is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC ADR and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and BP PLC 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 BP PLC ADR 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 BP PLC i.e., BP PLC and Brighthouse Financial go up and down completely randomly.
Pair Corralation between BP PLC and Brighthouse Financial
Allowing for the 90-day total investment horizon BP PLC ADR is expected to generate 1.83 times more return on investment than Brighthouse Financial. However, BP PLC is 1.83 times more volatile than Brighthouse Financial. It trades about 0.07 of its potential returns per unit of risk. Brighthouse Financial is currently generating about -0.08 per unit of risk. If you would invest 2,856 in BP PLC ADR on August 31, 2024 and sell it today you would earn a total of 57.00 from holding BP PLC ADR or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC ADR vs. Brighthouse Financial
Performance |
| Timeline |
| BP PLC ADR |
| Brighthouse Financial |
BP PLC and Brighthouse Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and Brighthouse Financial
The main advantage of trading using opposite BP PLC and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC 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.| BP PLC vs. RLJ Lodging Trust | BP PLC vs. Aquagold International | BP PLC vs. Stepstone Group | BP PLC vs. Morningstar Unconstrained Allocation |
| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Unum Group | Brighthouse Financial vs. Argo Group 65 | Brighthouse Financial vs. Arch Capital Group |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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