Correlation Between BNY Mellon and FF Australia

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

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

Diversification Opportunities for BNY Mellon and FF Australia

0.3

Correlation Coefficient

BNY Mellon  FF Australia

Weak diversification

The 3 months correlation between BNY and FPGK is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon Global and FF Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF Australia 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 Global are associated (or correlated) with FF Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF Australia has no effect on the direction of BNY Mellon i.e., BNY Mellon and FF Australia go up and down completely randomly.

Pair Corralation between BNY Mellon and FF Australia

Assuming the 90 days trading horizon BNY Mellon Global is expected to generate 0.44 times more return on investment than FF Australia. However, BNY Mellon Global is 2.27 times less risky than FF Australia. It trades about 0.07 of its potential returns per unit of risk. FF Australia is currently generating about -0.25 per unit of risk. If you would invest  165.00  in BNY Mellon Global on September 21, 2024 and sell it today you would earn a total of  1.00  from holding BNY Mellon Global or generate 0.61% return on investment over 90 days.

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

BNY Mellon Global  vs.  FF Australia

BNY Mellon Global

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Global are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, BNY Mellon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

FF Australia

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days FF Australia has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, FF Australia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BNY Mellon and FF Australia

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

The idea behind BNY Mellon Global and FF Australia 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.