Correlation Between Navient SR and Brighthouse Financial

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

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

Diversification Opportunities for Navient SR and Brighthouse Financial

0.63

Correlation Coefficient

Navient SR  Brighthouse Financial

Poor diversification

The 3 months correlation between Navient and Brighthouse is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Navient SR and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Navient SR 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 Navient SR are associated (or correlated) with Brighthouse Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brighthouse Financial has no effect on the direction of Navient SR i.e., Navient SR and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Navient SR and Brighthouse Financial

Considering the 90-day investment horizon Navient SR is expected to generate 1.19 times less return on investment than Brighthouse Financial. In addition to that, Navient SR is 1.43 times more volatile than Brighthouse Financial. It trades about 0.04 of its total potential returns per unit of risk. Brighthouse Financial is currently generating about 0.06 per unit of volatility. If you would invest  2,400  in Brighthouse Financial on August 31, 2024 and sell it today you would earn a total of  57.00  from holding Brighthouse Financial or generate 2.38% return on investment over 90 days.

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

Navient SR  vs.  Brighthouse Financial

Navient SR

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Navient SR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Navient SR is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brighthouse Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brighthouse Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Brighthouse Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Navient SR and Brighthouse Financial

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

The idea behind Navient SR and Brighthouse Financial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.