Correlation Between Brighthouse Financial and CNO Financial

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

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

Diversification Opportunities for Brighthouse Financial and CNO Financial

-0.74

Correlation Coefficient

Brighthouse Financial  CNO Financial

Pay attention - limited upside

The 3 months correlation between Brighthouse and CNO is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group and Brighthouse 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 Brighthouse Financial are associated (or correlated) with CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and CNO Financial go up and down completely randomly.

Pair Corralation between Brighthouse Financial and CNO Financial

Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the CNO Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brighthouse Financial is 1.81 times less risky than CNO Financial. The preferred stock trades about -0.07 of its potential returns per unit of risk. The CNO Financial Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,382  in CNO Financial Group on September 14, 2024 and sell it today you would earn a total of  430.00  from holding CNO Financial Group or generate 12.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Brighthouse Financial  vs.  CNO Financial Group

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.

CNO Financial Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNO Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CNO Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brighthouse Financial and CNO Financial

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

The idea behind Brighthouse Financial and CNO Financial Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.