Correlation Between Prudential PLC and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both Prudential 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 Prudential 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 Prudential PLC ADR and Brighthouse Financial, you can compare the effects of market volatilities on Prudential 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 Prudential PLC with a short position of Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential PLC and Brighthouse Financial.
Diversification Opportunities for Prudential PLC and Brighthouse Financial
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prudential and Brighthouse is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Prudential 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 Prudential 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 Prudential 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 Prudential PLC i.e., Prudential PLC and Brighthouse Financial go up and down completely randomly.
Pair Corralation between Prudential PLC and Brighthouse Financial
Considering the 90-day investment horizon Prudential PLC ADR is expected to generate 1.59 times more return on investment than Brighthouse Financial. However, Prudential PLC is 1.59 times more volatile than Brighthouse Financial. It trades about 0.05 of its potential returns per unit of risk. Brighthouse Financial is currently generating about -0.25 per unit of risk. If you would invest 2,113 in Prudential PLC ADR on January 24, 2025 and sell it today you would earn a total of 58.00 from holding Prudential PLC ADR or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential PLC ADR vs. Brighthouse Financial
Performance |
| Timeline |
| Prudential PLC ADR |
| Brighthouse Financial |
Prudential PLC and Brighthouse Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential PLC and Brighthouse Financial
The main advantage of trading using opposite Prudential PLC and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential 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.| Prudential PLC vs. CNO Financial Group | Prudential PLC vs. Jackson Financial | Prudential PLC vs. MetLife Preferred Stock | Prudential PLC vs. Jackson Financial |
| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Fifth Third Bancorp | Brighthouse Financial vs. First Citizens BancShares |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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