Correlation Between IShares Broad and BNY Mellon

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

Diversification Opportunities for IShares Broad and BNY Mellon

0.99

Correlation Coefficient

IShares Broad  BNY Mellon

No risk reduction

The 3 months correlation between IShares and BNY is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD and BNY Mellon High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon High and IShares Broad 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 Broad USD 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 High has no effect on the direction of IShares Broad i.e., IShares Broad and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares Broad and BNY Mellon

Given the investment horizon of 90 days IShares Broad is expected to generate 1.03 times less return on investment than BNY Mellon. In addition to that, IShares Broad is 1.01 times more volatile than BNY Mellon High. It trades about 0.21 of its total potential returns per unit of risk. BNY Mellon High is currently generating about 0.22 per unit of volatility. If you would invest  4,736  in BNY Mellon High on September 2, 2024 and sell it today you would earn a total of  131.00  from holding BNY Mellon High or generate 2.77% return on investment over 90 days.

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

iShares Broad USD  vs.  BNY Mellon High

iShares Broad USD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Broad USD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, IShares Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BNY Mellon High

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon High are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, BNY Mellon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Broad and BNY Mellon

The main advantage of trading using opposite IShares Broad and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad 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 Broad USD and BNY Mellon High 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.