Correlation Between IShares SP and BNY Mellon

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

Diversification Opportunities for IShares SP and BNY Mellon

0.9

Correlation Coefficient

IShares SP  BNY Mellon

Almost no diversification

The 3 months correlation between IShares and BNY is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and BNY Mellon ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon ETF and IShares SP 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 SP Small Cap 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 ETF has no effect on the direction of IShares SP i.e., IShares SP and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares SP and BNY Mellon

Considering the 90-day investment horizon iShares SP Small Cap is expected to under-perform the BNY Mellon. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP Small Cap is 1.04 times less risky than BNY Mellon. The etf trades about -0.31 of its potential returns per unit of risk. The BNY Mellon ETF is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  10,779  in BNY Mellon ETF on October 12, 2024 and sell it today you would lose (649.00) from holding BNY Mellon ETF or give up 6.02% of portfolio value over 90 days.

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

iShares SP Small Cap  vs.  BNY Mellon ETF

iShares SP Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BNY Mellon ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNY Mellon ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BNY Mellon is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares SP and BNY Mellon

The main advantage of trading using opposite IShares SP and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP Small Cap and BNY Mellon ETF 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.