Correlation Between Bank of New York and Four Seasons

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

By analyzing existing cross correlation between Bank of New and Four Seasons Education, you can compare the effects of market volatilities on Bank of New York and Four Seasons 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 New York with a short position of Four Seasons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and Four Seasons.

Diversification Opportunities for Bank of New York and Four Seasons

-0.16

Correlation Coefficient

Bank of New York  Four Seasons

Good diversification

The 3 months correlation between Bank and Four is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education and Bank of New York 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 New are associated (or correlated) with Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of Bank of New York i.e., Bank of New York and Four Seasons go up and down completely randomly.

Pair Corralation between Bank of New York and Four Seasons

Allowing for the 90-day total investment horizon Bank of New York is expected to generate 20.43 times less return on investment than Four Seasons. But when comparing it to its historical volatility, Bank of New is 37.43 times less risky than Four Seasons. It trades about 0.09 of its potential returns per unit of risk. Four Seasons Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  646.00  in Four Seasons Education on September 20, 2024 and sell it today you would earn a total of  483.00  from holding Four Seasons Education or generate 74.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.03%
Values	Daily Returns

Bank of New  vs.  Four Seasons Education

Bank of New York

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Bank of New York may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Four Seasons Education

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Seasons Education are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Four Seasons unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of New York and Four Seasons

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

The idea behind Bank of New and Four Seasons Education 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.