Correlation Between BNY Mellon and Western Asset

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

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

Diversification Opportunities for BNY Mellon and Western Asset

0.06

Correlation Coefficient

BNY Mellon  Western Asset

Significant diversification

The 3 months correlation between BNY and Western is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon High and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High 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 High are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of BNY Mellon i.e., BNY Mellon and Western Asset go up and down completely randomly.

Pair Corralation between BNY Mellon and Western Asset

Considering the 90-day investment horizon BNY Mellon is expected to generate 50.87 times less return on investment than Western Asset. In addition to that, BNY Mellon is 1.06 times more volatile than Western Asset High. It trades about 0.0 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.15 per unit of volatility. If you would invest  385.00  in Western Asset High on December 26, 2024 and sell it today you would earn a total of  18.00  from holding Western Asset High or generate 4.68% return on investment over 90 days.

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

BNY Mellon High  vs.  Western Asset High

BNY Mellon High

Risk-Adjusted Performance

Weak

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

Western Asset High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BNY Mellon and Western Asset

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

The idea behind BNY Mellon High and Western Asset High 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.