Correlation Between Athene Holding and Brighthouse Financial

Can any of the company-specific risk be diversified away by investing in both Athene Holding 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 Athene Holding and Brighthouse Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Athene Holding and Brighthouse Financial, you can compare the effects of market volatilities on Athene Holding 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 Athene Holding with a short position of Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Athene Holding and Brighthouse Financial.

Diversification Opportunities for Athene Holding and Brighthouse Financial

0.78

Correlation Coefficient

Athene Holding  Brighthouse Financial

Poor diversification

The 3 months correlation between Athene and Brighthouse is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Athene Holding and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Athene Holding 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 Athene Holding 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 Athene Holding i.e., Athene Holding and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Athene Holding and Brighthouse Financial

Assuming the 90 days trading horizon Athene Holding is expected to under-perform the Brighthouse Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Athene Holding is 1.0 times less risky than Brighthouse Financial. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Brighthouse Financial is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,901  in Brighthouse Financial on September 22, 2024 and sell it today you would lose (74.00) from holding Brighthouse Financial or give up 3.89% of portfolio value over 90 days.

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

Athene Holding  vs.  Brighthouse Financial

Athene Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Athene Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Athene Holding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Brighthouse Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brighthouse Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Preferred Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Athene Holding and Brighthouse Financial

The main advantage of trading using opposite Athene Holding and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Athene Holding 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.

The idea behind Athene Holding and Brighthouse Financial 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.