Correlation Between Bank of New York and Mazda

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

By analyzing existing cross correlation between Bank of New and Mazda Motor, you can compare the effects of market volatilities on Bank of New York and Mazda 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 Mazda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and Mazda.

Diversification Opportunities for Bank of New York and Mazda

-0.65

Correlation Coefficient

Bank of New York  Mazda

Excellent diversification

The 3 months correlation between Bank and Mazda is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and Mazda Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor 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 Bank of New are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor has no effect on the direction of Bank of New York i.e., Bank of New York and Mazda go up and down completely randomly.

Pair Corralation between Bank of New York and Mazda

Allowing for the 90-day total investment horizon Bank of New is expected to generate 0.34 times more return on investment than Mazda. However, Bank of New is 2.98 times less risky than Mazda. It trades about 0.13 of its potential returns per unit of risk. Mazda Motor is currently generating about -0.05 per unit of risk. If you would invest  5,310  in Bank of New on October 14, 2024 and sell it today you would earn a total of  2,232  from holding Bank of New or generate 42.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.68%
Values	Daily Returns

Bank of New  vs.  Mazda Motor

Bank of New York

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank of New York is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Mazda Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank of New York and Mazda

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

The idea behind Bank of New and Mazda Motor 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.