Correlation Between Manulife Financial and Brighthouse Financial

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

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

Diversification Opportunities for Manulife Financial and Brighthouse Financial

-0.7

Correlation Coefficient

Manulife Financial  Brighthouse Financial

Excellent diversification

The 3 months correlation between Manulife and Brighthouse is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Manulife 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 Manulife Financial Corp 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 Manulife Financial i.e., Manulife Financial and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Manulife Financial and Brighthouse Financial

Considering the 90-day investment horizon Manulife Financial Corp is expected to under-perform the Brighthouse Financial. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.18 times less risky than Brighthouse Financial. The stock trades about -0.2 of its potential returns per unit of risk. The Brighthouse Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,882  in Brighthouse Financial on September 19, 2024 and sell it today you would earn a total of  1.00  from holding Brighthouse Financial or generate 0.05% return on investment over 90 days.

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

Manulife Financial Corp  vs.  Brighthouse Financial

Manulife Financial Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 very healthy basic indicators, Brighthouse Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Manulife Financial and Brighthouse Financial

The main advantage of trading using opposite Manulife Financial and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial 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 Manulife Financial Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.