Correlation Between IShares Russell and BNY Mellon

Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 Russell 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 Russell 1000 and BNY Mellon Large, you can compare the effects of market volatilities on IShares Russell 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 Russell with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and BNY Mellon.

Diversification Opportunities for IShares Russell and BNY Mellon

1.0

Correlation Coefficient

IShares Russell  BNY Mellon

No risk reduction

The 3 months correlation between IShares and BNY is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and BNY Mellon Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Large and IShares Russell 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 Russell 1000 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 Large has no effect on the direction of IShares Russell i.e., IShares Russell and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares Russell and BNY Mellon

Considering the 90-day investment horizon iShares Russell 1000 is expected to generate 0.98 times more return on investment than BNY Mellon. However, iShares Russell 1000 is 1.02 times less risky than BNY Mellon. It trades about 0.22 of its potential returns per unit of risk. BNY Mellon Large is currently generating about 0.21 per unit of risk. If you would invest  30,136  in iShares Russell 1000 on September 3, 2024 and sell it today you would earn a total of  3,165  from holding iShares Russell 1000 or generate 10.5% return on investment over 90 days.

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

iShares Russell 1000  vs.  BNY Mellon Large

iShares Russell 1000

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BNY Mellon Large

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Large are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, BNY Mellon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Russell and BNY Mellon

The main advantage of trading using opposite IShares Russell and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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 Russell 1000 and BNY Mellon Large 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..