Correlation Between IShares MSCI and BNY Mellon

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

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

Diversification Opportunities for IShares MSCI and BNY Mellon

0.98

Correlation Coefficient

IShares MSCI  BNY Mellon

Almost no diversification

The 3 months correlation between IShares and BNY is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE 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 IShares MSCI 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 iShares MSCI EAFE 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 IShares MSCI i.e., IShares MSCI and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares MSCI and BNY Mellon

Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.11 times more return on investment than BNY Mellon. However, IShares MSCI is 1.11 times more volatile than BNY Mellon ETF. It trades about -0.05 of its potential returns per unit of risk. BNY Mellon ETF is currently generating about -0.09 per unit of risk. If you would invest  10,522  in iShares MSCI EAFE on September 3, 2024 and sell it today you would lose (341.00) from holding iShares MSCI EAFE or give up 3.24% of portfolio value over 90 days.

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

iShares MSCI EAFE  vs.  BNY Mellon ETF

iShares MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fairly strong fundamental indicators, BNY Mellon is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and BNY Mellon

The main advantage of trading using opposite IShares MSCI and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI EAFE 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.