Correlation Between Brighthouse Financial and Babcock Wilcox

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

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

Diversification Opportunities for Brighthouse Financial and Babcock Wilcox

-0.21

Correlation Coefficient

Brighthouse Financial  Babcock Wilcox

Very good diversification

The 3 months correlation between Brighthouse and Babcock is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and Babcock Wilcox Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter 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 Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Brighthouse Financial and Babcock Wilcox

Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the Babcock Wilcox. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brighthouse Financial is 4.68 times less risky than Babcock Wilcox. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Babcock Wilcox Enterprises is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  271.00  in Babcock Wilcox Enterprises on May 7, 2025 and sell it today you would earn a total of  757.00  from holding Babcock Wilcox Enterprises or generate 279.34% return on investment over 90 days.

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

Brighthouse Financial  vs.  Babcock Wilcox Enterprises

Brighthouse Financial

Risk-Adjusted Performance

Weakest

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 weak 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.

Babcock Wilcox Enter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Babcock Wilcox sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brighthouse Financial and Babcock Wilcox

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

The idea behind Brighthouse Financial and Babcock Wilcox Enterprises 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.