Correlation Between BNY Mellon and FlexShares STOXX

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

By analyzing existing cross correlation between BNY Mellon ETF and FlexShares STOXX Global, you can compare the effects of market volatilities on BNY Mellon and FlexShares STOXX 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 FlexShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and FlexShares STOXX.

Diversification Opportunities for BNY Mellon and FlexShares STOXX

0.32

Correlation Coefficient

BNY Mellon  FlexShares STOXX

Weak diversification

The 3 months correlation between BNY and FlexShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon ETF and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global 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 ETF are associated (or correlated) with FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of BNY Mellon i.e., BNY Mellon and FlexShares STOXX go up and down completely randomly.

Pair Corralation between BNY Mellon and FlexShares STOXX

Given the investment horizon of 90 days BNY Mellon ETF is expected to generate 0.03 times more return on investment than FlexShares STOXX. However, BNY Mellon ETF is 33.87 times less risky than FlexShares STOXX. It trades about 0.85 of its potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.01 per unit of risk. If you would invest  4,920  in BNY Mellon ETF on December 29, 2024 and sell it today you would earn a total of  65.00  from holding BNY Mellon ETF or generate 1.32% return on investment over 90 days.

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

BNY Mellon ETF  vs.  FlexShares STOXX Global

BNY Mellon ETF

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon ETF are ranked lower than 67 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BNY Mellon is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

FlexShares STOXX Global

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BNY Mellon and FlexShares STOXX

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

The idea behind BNY Mellon ETF and FlexShares STOXX Global 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.