Correlation Between FT Cboe and BNY Mellon

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

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

Diversification Opportunities for FT Cboe and BNY Mellon

0.75

Correlation Coefficient

FT Cboe  BNY Mellon

Poor diversification

The 3 months correlation between FMAR and BNY is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and BNY Mellon High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon High and FT Cboe 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 FT Cboe Vest 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 High has no effect on the direction of FT Cboe i.e., FT Cboe and BNY Mellon go up and down completely randomly.

Pair Corralation between FT Cboe and BNY Mellon

Given the investment horizon of 90 days FT Cboe Vest is expected to under-perform the BNY Mellon. In addition to that, FT Cboe is 1.25 times more volatile than BNY Mellon High. It trades about -0.05 of its total potential returns per unit of risk. BNY Mellon High is currently generating about 0.0 per unit of volatility. If you would invest  255.00  in BNY Mellon High on December 26, 2024 and sell it today you would earn a total of  0.00  from holding BNY Mellon High or generate 0.0% return on investment over 90 days.

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

FT Cboe Vest  vs.  BNY Mellon High

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with FT Cboe and BNY Mellon

The main advantage of trading using opposite FT Cboe and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe 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 FT Cboe Vest and BNY Mellon 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.