Correlation Between AXIS Capital and Brighthouse Financial

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

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

Diversification Opportunities for AXIS Capital and Brighthouse Financial

0.49

Correlation Coefficient

AXIS Capital  Brighthouse Financial

Very weak diversification

The 3 months correlation between AXIS and Brighthouse is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AXIS Capital Holdings and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and AXIS Capital 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 AXIS Capital Holdings 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 AXIS Capital i.e., AXIS Capital and Brighthouse Financial go up and down completely randomly.

Pair Corralation between AXIS Capital and Brighthouse Financial

Assuming the 90 days trading horizon AXIS Capital Holdings is expected to generate 0.71 times more return on investment than Brighthouse Financial. However, AXIS Capital Holdings is 1.4 times less risky than Brighthouse Financial. It trades about -0.21 of its potential returns per unit of risk. Brighthouse Financial is currently generating about -0.15 per unit of risk. If you would invest  2,262  in AXIS Capital Holdings on September 22, 2024 and sell it today you would lose (86.00) from holding AXIS Capital Holdings or give up 3.8% of portfolio value over 90 days.

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

AXIS Capital Holdings  vs.  Brighthouse Financial

AXIS Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXIS Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AXIS Capital is not utilizing all of its potentials. The latest 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 AXIS Capital and Brighthouse Financial

The main advantage of trading using opposite AXIS Capital and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXIS Capital 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 AXIS Capital Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .