Correlation Between Bank of America and BNY Mellon

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

By analyzing existing cross correlation between Bank of America and BNY Mellon ETF, you can compare the effects of market volatilities on Bank of America and BNY Mellon 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 Bank of America with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BNY Mellon.

Diversification Opportunities for Bank of America and BNY Mellon

0.0

Correlation Coefficient

Bank of America  BNY Mellon

Pay attention - limited upside

The 3 months correlation between Bank and BNY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BNY Mellon ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon ETF and Bank of America 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 Bank of America are associated (or correlated) with BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon ETF has no effect on the direction of Bank of America i.e., Bank of America and BNY Mellon go up and down completely randomly.

Pair Corralation between Bank of America and BNY Mellon

If you would invest  4,044  in Bank of America on September 2, 2024 and sell it today you would earn a total of  707.00  from holding Bank of America or generate 17.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bank of America  vs.  BNY Mellon ETF

Bank of America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

BNY Mellon ETF

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Bank of America and BNY Mellon

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

The idea behind Bank of America and BNY Mellon ETF 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.