Correlation Between Bank of New York Mellon and Northern Trust

Can any of the company-specific risk be diversified away by investing in both Bank of New York Mellon and Northern Trust 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 Mellon and Northern Trust 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 Northern Trust, you can compare the effects of market volatilities on Bank of New York Mellon and Northern Trust 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 Mellon with a short position of Northern Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York Mellon and Northern Trust.

Diversification Opportunities for Bank of New York Mellon and Northern Trust

0.92

Correlation Coefficient

Bank of New York Mellon  Northern Trust

Almost no diversification

The 3 months correlation between Bank and Northern is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Northern Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Trust and Bank of New York 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 The Bank of are associated (or correlated) with Northern Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Trust has no effect on the direction of Bank of New York Mellon i.e., Bank of New York Mellon and Northern Trust go up and down completely randomly.

Pair Corralation between Bank of New York Mellon and Northern Trust

Assuming the 90 days horizon The Bank of is expected to generate 0.8 times more return on investment than Northern Trust. However, The Bank of is 1.25 times less risky than Northern Trust. It trades about 0.11 of its potential returns per unit of risk. Northern Trust is currently generating about 0.05 per unit of risk. If you would invest  4,034  in The Bank of on December 2, 2024 and sell it today you would earn a total of  4,319  from holding The Bank of or generate 107.06% return on investment over 90 days.

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

The Bank of  vs.  Northern Trust

Bank of New York Mellon

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 nearly fragile basic indicators, Bank of New York Mellon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Northern Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northern Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of New York Mellon and Northern Trust

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

The idea behind The Bank of and Northern Trust 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.