Correlation Between Bank of New York Mellon and Schweizer Electronic

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

Diversification Opportunities for Bank of New York Mellon and Schweizer Electronic

-0.25

Correlation Coefficient

Bank of New York Mellon  Schweizer Electronic

Very good diversification

The 3 months correlation between Bank and Schweizer is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and Schweizer Electronic AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweizer Electronic 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 Schweizer Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweizer Electronic has no effect on the direction of Bank of New York Mellon i.e., Bank of New York Mellon and Schweizer Electronic go up and down completely randomly.

Pair Corralation between Bank of New York Mellon and Schweizer Electronic

Assuming the 90 days horizon Bank of New York Mellon is expected to generate 27.02 times less return on investment than Schweizer Electronic. But when comparing it to its historical volatility, The Bank of is 13.93 times less risky than Schweizer Electronic. It trades about 0.05 of its potential returns per unit of risk. Schweizer Electronic AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  240.00  in Schweizer Electronic AG on December 27, 2024 and sell it today you would earn a total of  146.00  from holding Schweizer Electronic AG or generate 60.83% return on investment over 90 days.

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

The Bank of  vs.  Schweizer Electronic AG

Bank of New York Mellon

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bank of New York Mellon is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Schweizer Electronic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schweizer Electronic AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Schweizer Electronic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of New York Mellon and Schweizer Electronic

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

The idea behind The Bank of and Schweizer Electronic AG 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.