Correlation Between Allstate and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both Allstate 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 Allstate and Brighthouse Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Brighthouse Financial, you can compare the effects of market volatilities on Allstate 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 Allstate with a short position of Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Brighthouse Financial.
Diversification Opportunities for Allstate and Brighthouse Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allstate and Brighthouse is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial and Allstate 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 The Allstate 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 Allstate i.e., Allstate and Brighthouse Financial go up and down completely randomly.
Pair Corralation between Allstate and Brighthouse Financial
Assuming the 90 days trading horizon Allstate is expected to generate 1.54 times less return on investment than Brighthouse Financial. But when comparing it to its historical volatility, The Allstate is 1.38 times less risky than Brighthouse Financial. It trades about 0.06 of its potential returns per unit of risk. Brighthouse Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,842 in Brighthouse Financial on September 2, 2024 and sell it today you would earn a total of 157.00 from holding Brighthouse Financial or generate 8.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. Brighthouse Financial
Performance |
| Timeline |
| Allstate |
| Brighthouse Financial |
Allstate and Brighthouse Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Brighthouse Financial
The main advantage of trading using opposite Allstate and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate 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.| Allstate vs. Brighthouse Financial | Allstate vs. First Citizens BancShares | Allstate vs. Northern Trust | Allstate vs. Dime Community Bancshares |
| Brighthouse Financial vs. Jackson Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. MetLife Preferred Stock |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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