Correlation Between Midwest Holding and Brighthouse Financial

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

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

Diversification Opportunities for Midwest Holding and Brighthouse Financial

0.0

Correlation Coefficient

Midwest Holding  Brighthouse Financial

Pay attention - limited upside

The 3 months correlation between Midwest and Brighthouse is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Midwest Holding and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Midwest Holding 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 Midwest Holding 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 Midwest Holding i.e., Midwest Holding and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Midwest Holding and Brighthouse Financial

Given the investment horizon of 90 days Midwest Holding is expected to generate 4.56 times more return on investment than Brighthouse Financial. However, Midwest Holding is 4.56 times more volatile than Brighthouse Financial. It trades about 0.09 of its potential returns per unit of risk. Brighthouse Financial is currently generating about 0.03 per unit of risk. If you would invest  1,274  in Midwest Holding on September 20, 2024 and sell it today you would earn a total of  1,377  from holding Midwest Holding or generate 108.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	28.43%
Values	Daily Returns

Midwest Holding  vs.  Brighthouse Financial

Midwest Holding

Risk-Adjusted Performance

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Very Weak

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

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.

Pair Trading with Midwest Holding and Brighthouse Financial

The main advantage of trading using opposite Midwest Holding and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midwest Holding 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 Midwest Holding 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.