Correlation Between IShares Core and BNY Mellon

Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SP and BNY Mellon Mid, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BNY Mellon.

Diversification Opportunities for IShares Core and BNY Mellon

1.0

Correlation Coefficient

IShares Core  BNY Mellon

No risk reduction

The 3 months correlation between IShares and BNY is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and BNY Mellon Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Mid and IShares Core 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 Core SP 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 Mid has no effect on the direction of IShares Core i.e., IShares Core and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares Core and BNY Mellon

Considering the 90-day investment horizon IShares Core is expected to generate 1.06 times less return on investment than BNY Mellon. In addition to that, IShares Core is 1.12 times more volatile than BNY Mellon Mid. It trades about 0.21 of its total potential returns per unit of risk. BNY Mellon Mid is currently generating about 0.24 per unit of volatility. If you would invest  9,633  in BNY Mellon Mid on September 5, 2024 and sell it today you would earn a total of  1,311  from holding BNY Mellon Mid or generate 13.61% return on investment over 90 days.

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

iShares Core SP  vs.  BNY Mellon Mid

iShares Core SP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward-looking indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BNY Mellon Mid

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Mid are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, BNY Mellon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and BNY Mellon

The main advantage of trading using opposite IShares Core and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and BNY Mellon Mid 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.