Correlation Between Brightsphere Investment and Farmers

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

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

Diversification Opportunities for Brightsphere Investment and Farmers

-0.62

Correlation Coefficient

Brightsphere Investment  Farmers

Excellent diversification

The 3 months correlation between Brightsphere and Farmers is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Farmers and Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers and Merchants and Brightsphere Investment 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 Brightsphere Investment Group are associated (or correlated) with Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers and Merchants has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Farmers go up and down completely randomly.

Pair Corralation between Brightsphere Investment and Farmers

Given the investment horizon of 90 days Brightsphere Investment Group is expected to under-perform the Farmers. But the stock apears to be less risky and, when comparing its historical volatility, Brightsphere Investment Group is 3.32 times less risky than Farmers. The stock trades about -0.4 of its potential returns per unit of risk. The Farmers and Merchants is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,383  in Farmers and Merchants on September 27, 2024 and sell it today you would earn a total of  417.00  from holding Farmers and Merchants or generate 30.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Brightsphere Investment Group  vs.  Farmers and Merchants

Brightsphere Investment

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Brightsphere Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Farmers and Merchants

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers and Merchants are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Farmers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brightsphere Investment and Farmers

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

The idea behind Brightsphere Investment Group and Farmers and Merchants 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.