Correlation Between Brighthouse Financial and MetLife

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

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

Diversification Opportunities for Brighthouse Financial and MetLife

-0.27

Correlation Coefficient

Brighthouse Financial  MetLife

Very good diversification

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

Pair Corralation between Brighthouse Financial and MetLife

Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the MetLife. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brighthouse Financial is 1.99 times less risky than MetLife. The preferred stock trades about -0.19 of its potential returns per unit of risk. The MetLife is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,425  in MetLife on September 21, 2024 and sell it today you would lose (414.00) from holding MetLife or give up 4.91% of portfolio value over 90 days.

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

Brighthouse Financial  vs.  MetLife

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. Even with latest unsteady performance, the Preferred Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

MetLife

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetLife has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, MetLife is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Brighthouse Financial and MetLife

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

The idea behind Brighthouse Financial and MetLife 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.