Correlation Between Brighthouse Financial and Allstate

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

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

Diversification Opportunities for Brighthouse Financial and Allstate

0.18

Correlation Coefficient

Brighthouse Financial  Allstate

Average diversification

The 3 months correlation between Brighthouse and Allstate is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate 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 Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and Allstate go up and down completely randomly.

Pair Corralation between Brighthouse Financial and Allstate

Assuming the 90 days horizon Brighthouse Financial is expected to generate 1.46 times more return on investment than Allstate. However, Brighthouse Financial is 1.46 times more volatile than The Allstate. It trades about 0.29 of its potential returns per unit of risk. The Allstate is currently generating about 0.14 per unit of risk. If you would invest  1,614  in Brighthouse Financial on December 4, 2024 and sell it today you would earn a total of  79.00  from holding Brighthouse Financial or generate 4.89% return on investment over 90 days.

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

Brighthouse Financial  vs.  The Allstate

Brighthouse Financial

Risk-Adjusted Performance

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 unfluctuating 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.

Allstate

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Allstate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Allstate is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brighthouse Financial and Allstate

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

The idea behind Brighthouse Financial and The Allstate 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.