Correlation Between Primerica and Brighthouse Financial

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

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

Diversification Opportunities for Primerica and Brighthouse Financial

-0.65

Correlation Coefficient

Primerica  Brighthouse Financial

Excellent diversification

The 3 months correlation between Primerica and Brighthouse is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Primerica and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Primerica 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 Primerica 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 Primerica i.e., Primerica and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Primerica and Brighthouse Financial

Considering the 90-day investment horizon Primerica is expected to generate 0.87 times more return on investment than Brighthouse Financial. However, Primerica is 1.15 times less risky than Brighthouse Financial. It trades about 0.1 of its potential returns per unit of risk. Brighthouse Financial is currently generating about 0.03 per unit of risk. If you would invest  13,816  in Primerica on September 19, 2024 and sell it today you would earn a total of  13,748  from holding Primerica or generate 99.51% return on investment over 90 days.

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

Primerica  vs.  Brighthouse Financial

Primerica

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Primerica are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Primerica 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 Primerica and Brighthouse Financial

The main advantage of trading using opposite Primerica and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primerica 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 Primerica 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.