Correlation Between Brighthouse Financial and AXIS Capital

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

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

Diversification Opportunities for Brighthouse Financial and AXIS Capital

0.49

Correlation Coefficient

Brighthouse Financial  AXIS Capital

Very weak diversification

The 3 months correlation between Brighthouse and AXIS is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital Holdings 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and AXIS Capital go up and down completely randomly.

Pair Corralation between Brighthouse Financial and AXIS Capital

Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the AXIS Capital. In addition to that, Brighthouse Financial is 1.4 times more volatile than AXIS Capital Holdings. It trades about -0.15 of its total potential returns per unit of risk. AXIS Capital Holdings is currently generating about -0.21 per unit of volatility. 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

Brighthouse Financial  vs.  AXIS Capital Holdings

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.

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.

Pair Trading with Brighthouse Financial and AXIS Capital

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

The idea behind Brighthouse Financial and AXIS Capital Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.