Correlation Between Brightsphere Investment and Arrowmark Financial
Can any of the company-specific risk be diversified away by investing in both Brightsphere Investment and Arrowmark 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 Brightsphere Investment and Arrowmark Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brightsphere Investment Group and Arrowmark Financial Corp, you can compare the effects of market volatilities on Brightsphere Investment and Arrowmark 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 Brightsphere Investment with a short position of Arrowmark Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brightsphere Investment and Arrowmark Financial.
Diversification Opportunities for Brightsphere Investment and Arrowmark Financial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brightsphere and Arrowmark is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Arrowmark Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowmark Financial Corp and Brightsphere Investment 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 Brightsphere Investment Group are associated (or correlated) with Arrowmark Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowmark Financial Corp has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Arrowmark Financial go up and down completely randomly.
Pair Corralation between Brightsphere Investment and Arrowmark Financial
Given the investment horizon of 90 days Brightsphere Investment Group is expected to generate 1.93 times more return on investment than Arrowmark Financial. However, Brightsphere Investment is 1.93 times more volatile than Arrowmark Financial Corp. It trades about 0.13 of its potential returns per unit of risk. Arrowmark Financial Corp is currently generating about 0.13 per unit of risk. If you would invest 2,265 in Brightsphere Investment Group on September 3, 2024 and sell it today you would earn a total of 825.00 from holding Brightsphere Investment Group or generate 36.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brightsphere Investment Group vs. Arrowmark Financial Corp
Performance |
| Timeline |
| Brightsphere Investment |
| Arrowmark Financial Corp |
Brightsphere Investment and Arrowmark Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brightsphere Investment and Arrowmark Financial
The main advantage of trading using opposite Brightsphere Investment and Arrowmark Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brightsphere Investment position performs unexpectedly, Arrowmark 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 Arrowmark Financial will offset losses from the drop in Arrowmark Financial's long position.The idea behind Brightsphere Investment Group and Arrowmark Financial Corp 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.
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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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