Correlation Between Brightsphere Investment and Southwestern Energy

Can any of the company-specific risk be diversified away by investing in both Brightsphere Investment and Southwestern Energy 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 Southwestern Energy 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 Southwestern Energy, you can compare the effects of market volatilities on Brightsphere Investment and Southwestern Energy 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 Southwestern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brightsphere Investment and Southwestern Energy.

Diversification Opportunities for Brightsphere Investment and Southwestern Energy

-0.76

Correlation Coefficient

Brightsphere Investment  Southwestern Energy

Pay attention - limited upside

The 3 months correlation between Brightsphere and Southwestern is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Southwestern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwestern Energy 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 Southwestern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwestern Energy has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Southwestern Energy go up and down completely randomly.

Pair Corralation between Brightsphere Investment and Southwestern Energy

If you would invest  2,317  in Brightsphere Investment Group on October 3, 2024 and sell it today you would earn a total of  317.00  from holding Brightsphere Investment Group or generate 13.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

Brightsphere Investment Group  vs.  Southwestern Energy

Brightsphere Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, Brightsphere Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Southwestern Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Brightsphere Investment and Southwestern Energy

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

The idea behind Brightsphere Investment Group and Southwestern Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.