Correlation Between Bank of New York and 3i Group

Can any of the company-specific risk be diversified away by investing in both Bank of New York and 3i Group 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 3i Group 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 3i Group plc, you can compare the effects of market volatilities on Bank of New York and 3i Group 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 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and 3i Group.

Diversification Opportunities for Bank of New York and 3i Group

0.39

Correlation Coefficient

Bank of New York  3i Group

Weak diversification

The 3 months correlation between Bank and TGOPF is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and 3i Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group plc 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 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group plc has no effect on the direction of Bank of New York i.e., Bank of New York and 3i Group go up and down completely randomly.

Pair Corralation between Bank of New York and 3i Group

Allowing for the 90-day total investment horizon Bank of New is expected to generate 0.46 times more return on investment than 3i Group. However, Bank of New is 2.16 times less risky than 3i Group. It trades about 0.28 of its potential returns per unit of risk. 3i Group plc is currently generating about 0.11 per unit of risk. If you would invest  6,732  in Bank of New on September 4, 2024 and sell it today you would earn a total of  1,379  from holding Bank of New or generate 20.48% return on investment over 90 days.

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

Bank of New  vs.  3i Group plc

Bank of New York

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Bank of New York disclosed solid returns over the last few months and may actually be approaching a breakup point.

3i Group plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 3i Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of New York and 3i Group

The main advantage of trading using opposite Bank of New York and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of New York position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.

The idea behind Bank of New and 3i Group plc 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.