Correlation Between IShares Currency and BNY Mellon

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

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

Diversification Opportunities for IShares Currency and BNY Mellon

0.86

Correlation Coefficient

IShares Currency  BNY Mellon

Very poor diversification

The 3 months correlation between IShares and BNY is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and BNY Mellon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon International and IShares Currency 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 iShares Currency Hedged 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 International has no effect on the direction of IShares Currency i.e., IShares Currency and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares Currency and BNY Mellon

Given the investment horizon of 90 days IShares Currency is expected to generate 1.03 times less return on investment than BNY Mellon. But when comparing it to its historical volatility, iShares Currency Hedged is 1.12 times less risky than BNY Mellon. It trades about 0.07 of its potential returns per unit of risk. BNY Mellon International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,429  in BNY Mellon International on December 2, 2024 and sell it today you would earn a total of  1,314  from holding BNY Mellon International or generate 20.44% return on investment over 90 days.

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

iShares Currency Hedged  vs.  BNY Mellon International

iShares Currency Hedged

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares Currency is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BNY Mellon International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, BNY Mellon is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Currency and BNY Mellon

The main advantage of trading using opposite IShares Currency and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency 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 iShares Currency Hedged and BNY Mellon International 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.