Correlation Between Bank of New York and Better Home

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

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

Diversification Opportunities for Bank of New York and Better Home

-0.2

Correlation Coefficient

Bank of New York  Better Home

Good diversification

The 3 months correlation between Bank and Better is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Better Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Home Finance and Bank of New York 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 The Bank of are associated (or correlated) with Better Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Home Finance has no effect on the direction of Bank of New York i.e., Bank of New York and Better Home go up and down completely randomly.

Pair Corralation between Bank of New York and Better Home

Allowing for the 90-day total investment horizon Bank of New York is expected to generate 11.78 times less return on investment than Better Home. But when comparing it to its historical volatility, The Bank of is 12.44 times less risky than Better Home. It trades about 0.1 of its potential returns per unit of risk. Better Home Finance is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Better Home Finance on December 27, 2024 and sell it today you would lose (0.34) from holding Better Home Finance or give up 3.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.49%
Values	Daily Returns

The Bank of  vs.  Better Home Finance

Bank of New York

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Bank of New York may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Better Home Finance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Better Home Finance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Better Home showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of New York and Better Home

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

The idea behind The Bank of and Better Home Finance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.