Correlation Between Brighthouse Financial and Zions Bancorporation

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

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

Diversification Opportunities for Brighthouse Financial and Zions Bancorporation

0.27

Correlation Coefficient

Brighthouse Financial  Zions Bancorporation

Modest diversification

The 3 months correlation between Brighthouse and Zions is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and Zions Bancorp. National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation 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 Zions Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zions Bancorporation has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and Zions Bancorporation go up and down completely randomly.

Pair Corralation between Brighthouse Financial and Zions Bancorporation

Assuming the 90 days horizon Brighthouse Financial is expected to generate 1.71 times more return on investment than Zions Bancorporation. However, Brighthouse Financial is 1.71 times more volatile than Zions Bancorporation National. It trades about 0.04 of its potential returns per unit of risk. Zions Bancorporation National is currently generating about 0.06 per unit of risk. If you would invest  2,075  in Brighthouse Financial on October 4, 2024 and sell it today you would earn a total of  275.00  from holding Brighthouse Financial or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Brighthouse Financial  vs.  Zions Bancorp. National

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. Despite quite persistent basic indicators, Brighthouse Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Zions Bancorporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zions Bancorporation National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Zions Bancorporation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brighthouse Financial and Zions Bancorporation

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

The idea behind Brighthouse Financial and Zions Bancorporation National 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.