Correlation Between California High-yield and Bny Mellon

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

By analyzing existing cross correlation between California High Yield Municipal and Bny Mellon Porate, you can compare the effects of market volatilities on California High-yield 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 California High-yield with a short position of Bny Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Bny Mellon.

Diversification Opportunities for California High-yield and Bny Mellon

0.86

Correlation Coefficient

California High-yield  Bny Mellon

Very poor diversification

The 3 months correlation between California and Bny is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Bny Mellon Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon Porate and California High-yield 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 California High Yield Municipal 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 Porate has no effect on the direction of California High-yield i.e., California High-yield and Bny Mellon go up and down completely randomly.

Pair Corralation between California High-yield and Bny Mellon

Assuming the 90 days horizon California High Yield Municipal is expected to under-perform the Bny Mellon. But the mutual fund apears to be less risky and, when comparing its historical volatility, California High Yield Municipal is 1.08 times less risky than Bny Mellon. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Bny Mellon Porate is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Bny Mellon Porate on October 23, 2024 and sell it today you would earn a total of  4.00  from holding Bny Mellon Porate or generate 0.33% return on investment over 90 days.

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

California High Yield Municipa  vs.  Bny Mellon Porate

California High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California High Yield Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, California High-yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bny Mellon Porate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bny Mellon Porate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Bny Mellon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California High-yield and Bny Mellon

The main advantage of trading using opposite California High-yield and Bny Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield 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 California High Yield Municipal and Bny Mellon Porate 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.