Correlation Between Brighthouse Financial and DHCNI

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

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

Diversification Opportunities for Brighthouse Financial and DHCNI

0.07

Correlation Coefficient

Brighthouse Financial  DHCNI

Significant diversification

The 3 months correlation between Brighthouse and DHCNI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and DHCNI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHCNI and Brighthouse Financial 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 Brighthouse Financial are associated (or correlated) with DHCNI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHCNI has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and DHCNI go up and down completely randomly.

Pair Corralation between Brighthouse Financial and DHCNI

Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the DHCNI. In addition to that, Brighthouse Financial is 1.21 times more volatile than DHCNI. It trades about -0.07 of its total potential returns per unit of risk. DHCNI is currently generating about -0.07 per unit of volatility. If you would invest  1,494  in DHCNI on December 30, 2024 and sell it today you would lose (85.00) from holding DHCNI or give up 5.69% of portfolio value over 90 days.

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

Brighthouse Financial  vs.  DHCNI

Brighthouse Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brighthouse Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

DHCNI

Risk-Adjusted Performance

Very Weak

Over the last 90 days DHCNI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, DHCNI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brighthouse Financial and DHCNI

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

The idea behind Brighthouse Financial and DHCNI 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.