Correlation Between BNY Mellon and JPMorgan BetaBuilders

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

By analyzing existing cross correlation between BNY Mellon Large and JPMorgan BetaBuilders Mid, you can compare the effects of market volatilities on BNY Mellon and JPMorgan BetaBuilders 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 BNY Mellon with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and JPMorgan BetaBuilders.

Diversification Opportunities for BNY Mellon and JPMorgan BetaBuilders

0.64

Correlation Coefficient

BNY Mellon  JPMorgan BetaBuilders

Poor diversification

The 3 months correlation between BNY and JPMorgan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon Large and JPMorgan BetaBuilders Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders Mid and BNY Mellon 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 BNY Mellon Large are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders Mid has no effect on the direction of BNY Mellon i.e., BNY Mellon and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between BNY Mellon and JPMorgan BetaBuilders

Given the investment horizon of 90 days BNY Mellon Large is expected to generate 0.74 times more return on investment than JPMorgan BetaBuilders. However, BNY Mellon Large is 1.35 times less risky than JPMorgan BetaBuilders. It trades about 0.13 of its potential returns per unit of risk. JPMorgan BetaBuilders Mid is currently generating about 0.06 per unit of risk. If you would invest  7,080  in BNY Mellon Large on November 19, 2024 and sell it today you would earn a total of  4,618  from holding BNY Mellon Large or generate 65.23% return on investment over 90 days.

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

BNY Mellon Large  vs.  JPMorgan BetaBuilders Mid

BNY Mellon Large

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Large are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, BNY Mellon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

JPMorgan BetaBuilders Mid

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan BetaBuilders Mid are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BNY Mellon and JPMorgan BetaBuilders

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

The idea behind BNY Mellon Large and JPMorgan BetaBuilders Mid 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.