Correlation Between First Trust and BNY Mellon

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

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

Diversification Opportunities for First Trust and BNY Mellon

-0.65

Correlation Coefficient

First Trust  BNY Mellon

Excellent diversification

The 3 months correlation between First and BNY is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and BNY Mellon ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon ETF and First Trust 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 First Trust S Network are associated (or correlated) with BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon ETF has no effect on the direction of First Trust i.e., First Trust and BNY Mellon go up and down completely randomly.

Pair Corralation between First Trust and BNY Mellon

Given the investment horizon of 90 days First Trust S Network is expected to generate 1.58 times more return on investment than BNY Mellon. However, First Trust is 1.58 times more volatile than BNY Mellon ETF. It trades about -0.13 of its potential returns per unit of risk. BNY Mellon ETF is currently generating about -0.23 per unit of risk. If you would invest  2,913  in First Trust S Network on October 11, 2024 and sell it today you would lose (88.00) from holding First Trust S Network or give up 3.02% of portfolio value over 90 days.

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

First Trust S Network  vs.  BNY Mellon ETF

First Trust S

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust S Network are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BNY Mellon ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNY Mellon ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with First Trust and BNY Mellon

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

The idea behind First Trust S Network and BNY Mellon ETF 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.