Correlation Between INVITATION HOMES and Bank of New York Mellon

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

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

Diversification Opportunities for INVITATION HOMES and Bank of New York Mellon

0.48

Correlation Coefficient

INVITATION HOMES  Bank of New York Mellon

Very weak diversification

The 3 months correlation between INVITATION and Bank is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York Mellon and INVITATION HOMES 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 INVITATION HOMES DL are associated (or correlated) with Bank of New York Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York Mellon has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Bank of New York Mellon go up and down completely randomly.

Pair Corralation between INVITATION HOMES and Bank of New York Mellon

Assuming the 90 days horizon INVITATION HOMES DL is expected to under-perform the Bank of New York Mellon. But the stock apears to be less risky and, when comparing its historical volatility, INVITATION HOMES DL is 1.81 times less risky than Bank of New York Mellon. The stock trades about -0.18 of its potential returns per unit of risk. The The Bank of is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  7,614  in The Bank of on October 6, 2024 and sell it today you would lose (125.00) from holding The Bank of or give up 1.64% of portfolio value over 90 days.

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

INVITATION HOMES DL  vs.  The Bank of

INVITATION HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bank of New York Mellon

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of New York Mellon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INVITATION HOMES and Bank of New York Mellon

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

The idea behind INVITATION HOMES DL and The Bank of 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.