Correlation Between Aflac Incorporated and Brighthouse Financial

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

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

Diversification Opportunities for Aflac Incorporated and Brighthouse Financial

0.43

Correlation Coefficient

Aflac Incorporated  Brighthouse Financial

Very weak diversification

The 3 months correlation between Aflac and Brighthouse is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aflac Incorporated and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Aflac Incorporated 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 Aflac Incorporated 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 Aflac Incorporated i.e., Aflac Incorporated and Brighthouse Financial go up and down completely randomly.

Pair Corralation between Aflac Incorporated and Brighthouse Financial

Considering the 90-day investment horizon Aflac Incorporated is expected to generate 1.18 times more return on investment than Brighthouse Financial. However, Aflac Incorporated is 1.18 times more volatile than Brighthouse Financial. It trades about -0.05 of its potential returns per unit of risk. Brighthouse Financial is currently generating about -0.12 per unit of risk. If you would invest  10,907  in Aflac Incorporated on September 17, 2024 and sell it today you would lose (503.00) from holding Aflac Incorporated or give up 4.61% of portfolio value over 90 days.

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

Aflac Incorporated  vs.  Brighthouse Financial

Aflac Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aflac Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Aflac Incorporated is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional 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 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.

Pair Trading with Aflac Incorporated and Brighthouse Financial

The main advantage of trading using opposite Aflac Incorporated and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aflac Incorporated 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 Aflac Incorporated 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.