Correlation Between Western Asset and BNY Mellon

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

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

Diversification Opportunities for Western Asset and BNY Mellon

-0.47

Correlation Coefficient

Western Asset  BNY Mellon

Very good diversification

The 3 months correlation between Western and BNY is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment 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 Western Asset 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 Western Asset Investment 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 Western Asset i.e., Western Asset and BNY Mellon go up and down completely randomly.

Pair Corralation between Western Asset and BNY Mellon

Considering the 90-day investment horizon Western Asset Investment is expected to under-perform the BNY Mellon. But the stock apears to be less risky and, when comparing its historical volatility, Western Asset Investment is 1.84 times less risky than BNY Mellon. The stock trades about -0.15 of its potential returns per unit of risk. The BNY Mellon High is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  247.00  in BNY Mellon High on September 12, 2024 and sell it today you would earn a total of  15.00  from holding BNY Mellon High or generate 6.07% return on investment over 90 days.

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

Western Asset Investment  vs.  BNY Mellon High

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

BNY Mellon High

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon High are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, BNY Mellon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Asset and BNY Mellon

The main advantage of trading using opposite Western Asset and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Investment 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.