Correlation Between Affiliated Managers and Brightsphere Investment

Can any of the company-specific risk be diversified away by investing in both Affiliated Managers and Brightsphere Investment 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 Affiliated Managers and Brightsphere Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affiliated Managers Group and Brightsphere Investment Group, you can compare the effects of market volatilities on Affiliated Managers and Brightsphere Investment 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 Affiliated Managers with a short position of Brightsphere Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Managers and Brightsphere Investment.

Diversification Opportunities for Affiliated Managers and Brightsphere Investment

0.45

Correlation Coefficient

Affiliated Managers  Brightsphere Investment

Very weak diversification

The 3 months correlation between Affiliated and Brightsphere is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and Brightsphere Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightsphere Investment and Affiliated Managers 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 Affiliated Managers Group are associated (or correlated) with Brightsphere Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightsphere Investment has no effect on the direction of Affiliated Managers i.e., Affiliated Managers and Brightsphere Investment go up and down completely randomly.

Pair Corralation between Affiliated Managers and Brightsphere Investment

Considering the 90-day investment horizon Affiliated Managers is expected to generate 1.88 times less return on investment than Brightsphere Investment. But when comparing it to its historical volatility, Affiliated Managers Group is 1.09 times less risky than Brightsphere Investment. It trades about 0.11 of its potential returns per unit of risk. Brightsphere Investment Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,448  in Brightsphere Investment Group on September 13, 2024 and sell it today you would earn a total of  581.00  from holding Brightsphere Investment Group or generate 23.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Affiliated Managers Group  vs.  Brightsphere Investment Group

Affiliated Managers

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Managers Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Affiliated Managers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brightsphere Investment

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, Brightsphere Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affiliated Managers and Brightsphere Investment

The main advantage of trading using opposite Affiliated Managers and Brightsphere Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers position performs unexpectedly, Brightsphere Investment 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 Brightsphere Investment will offset losses from the drop in Brightsphere Investment's long position.

The idea behind Affiliated Managers Group and Brightsphere Investment Group 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.