Correlation Between Bank of New York Mellon and State Street

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

Diversification Opportunities for Bank of New York Mellon and State Street

0.47

Correlation Coefficient

Bank of New York Mellon  State Street

Very weak diversification

The 3 months correlation between Bank and State is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Bank of New York Mellon i.e., Bank of New York Mellon and State Street go up and down completely randomly.

Pair Corralation between Bank of New York Mellon and State Street

Assuming the 90 days horizon The Bank of is expected to generate 1.02 times more return on investment than State Street. However, Bank of New York Mellon is 1.02 times more volatile than State Street. It trades about 0.08 of its potential returns per unit of risk. State Street is currently generating about -0.08 per unit of risk. If you would invest  7,360  in The Bank of on December 28, 2024 and sell it today you would earn a total of  552.00  from holding The Bank of or generate 7.5% return on investment over 90 days.

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

The Bank of  vs.  State Street

Bank of New York Mellon

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bank of New York Mellon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

State Street

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bank of New York Mellon and State Street

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

The idea behind The Bank of and State Street 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.