Correlation Between Brighthouse Financial and National Western

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

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

Diversification Opportunities for Brighthouse Financial and National Western

0.0

Correlation Coefficient

Brighthouse Financial  National Western

Pay attention - limited upside

The 3 months correlation between Brighthouse and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and National Western Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Western Life 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 National Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Western Life has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and National Western go up and down completely randomly.

Pair Corralation between Brighthouse Financial and National Western

Assuming the 90 days horizon Brighthouse Financial is expected to generate 3.57 times less return on investment than National Western. But when comparing it to its historical volatility, Brighthouse Financial is 1.75 times less risky than National Western. It trades about 0.03 of its potential returns per unit of risk. National Western Life is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  28,079  in National Western Life on September 20, 2024 and sell it today you would earn a total of  21,919  from holding National Western Life or generate 78.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	76.81%
Values	Daily Returns

Brighthouse Financial  vs.  National Western Life

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.

National Western Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Western Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, National Western 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 National Western

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

The idea behind Brighthouse Financial and National Western Life 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.