Correlation Between Brightsphere Investment and Federated Investors
Can any of the company-specific risk be diversified away by investing in both Brightsphere Investment and Federated Investors 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 Federated Investors 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 Federated Investors B, you can compare the effects of market volatilities on Brightsphere Investment and Federated Investors 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 Federated Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brightsphere Investment and Federated Investors.
Diversification Opportunities for Brightsphere Investment and Federated Investors
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brightsphere and Federated is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors 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 Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Federated Investors go up and down completely randomly.
Pair Corralation between Brightsphere Investment and Federated Investors
Given the investment horizon of 90 days Brightsphere Investment Group is expected to generate 1.57 times more return on investment than Federated Investors. However, Brightsphere Investment is 1.57 times more volatile than Federated Investors B. It trades about 0.25 of its potential returns per unit of risk. Federated Investors B is currently generating about 0.29 per unit of risk. If you would invest 2,342 in Brightsphere Investment Group on August 31, 2024 and sell it today you would earn a total of 779.00 from holding Brightsphere Investment Group or generate 33.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brightsphere Investment Group vs. Federated Investors B
Performance |
| Timeline |
| Brightsphere Investment |
| Federated Investors |
Brightsphere Investment and Federated Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brightsphere Investment and Federated Investors
The main advantage of trading using opposite Brightsphere Investment and Federated Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brightsphere Investment position performs unexpectedly, Federated Investors 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 Federated Investors will offset losses from the drop in Federated Investors' long position.The idea behind Brightsphere Investment Group and Federated Investors B 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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