Correlation Between BNY Mellon and American Century

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

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

Diversification Opportunities for BNY Mellon and American Century

-0.69

Correlation Coefficient

BNY Mellon  American Century

Excellent diversification

The 3 months correlation between BNY and American is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon ETF and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF and BNY Mellon 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 BNY Mellon ETF are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of BNY Mellon i.e., BNY Mellon and American Century go up and down completely randomly.

Pair Corralation between BNY Mellon and American Century

Given the investment horizon of 90 days BNY Mellon ETF is expected to under-perform the American Century. But the etf apears to be less risky and, when comparing its historical volatility, BNY Mellon ETF is 1.04 times less risky than American Century. The etf trades about -0.2 of its potential returns per unit of risk. The American Century ETF is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,536  in American Century ETF on September 24, 2024 and sell it today you would earn a total of  149.00  from holding American Century ETF or generate 2.28% return on investment over 90 days.

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

BNY Mellon ETF  vs.  American Century ETF

BNY Mellon ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNY Mellon ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

American Century ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, American Century is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BNY Mellon and American Century

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

The idea behind BNY Mellon ETF and American Century 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.