Correlation Between Brighthouse Financial and Aflac Incorporated

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

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

Diversification Opportunities for Brighthouse Financial and Aflac Incorporated

0.51

Correlation Coefficient

Brighthouse Financial  Aflac Incorporated

Very weak diversification

The 3 months correlation between Brighthouse and Aflac is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brighthouse Financial and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated 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 Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of Brighthouse Financial i.e., Brighthouse Financial and Aflac Incorporated go up and down completely randomly.

Pair Corralation between Brighthouse Financial and Aflac Incorporated

Assuming the 90 days horizon Brighthouse Financial is expected to under-perform the Aflac Incorporated. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brighthouse Financial is 1.06 times less risky than Aflac Incorporated. The preferred stock trades about -0.1 of its potential returns per unit of risk. The Aflac Incorporated is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  11,337  in Aflac Incorporated on November 29, 2024 and sell it today you would lose (664.00) from holding Aflac Incorporated or give up 5.86% of portfolio value over 90 days.

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

Brighthouse Financial  vs.  Aflac Incorporated

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. Even with latest weak performance, the Preferred Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Aflac Incorporated

Risk-Adjusted Performance

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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Brighthouse Financial and Aflac Incorporated

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

The idea behind Brighthouse Financial and Aflac Incorporated 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.