Correlation Between IShares Edge and BNY Mellon

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

Diversification Opportunities for IShares Edge and BNY Mellon

0.97

Correlation Coefficient

IShares Edge  BNY Mellon

Almost no diversification

The 3 months correlation between IShares and BNY is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI 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 Edge 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 Edge MSCI 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 Edge i.e., IShares Edge and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares Edge and BNY Mellon

Given the investment horizon of 90 days iShares Edge MSCI is expected to generate 1.01 times more return on investment than BNY Mellon. However, IShares Edge is 1.01 times more volatile than BNY Mellon International. It trades about 0.05 of its potential returns per unit of risk. BNY Mellon International is currently generating about 0.05 per unit of risk. If you would invest  2,512  in iShares Edge MSCI on September 12, 2024 and sell it today you would earn a total of  323.00  from holding iShares Edge MSCI or generate 12.86% return on investment over 90 days.

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

iShares Edge MSCI  vs.  BNY Mellon International

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

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

BNY Mellon International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Edge and BNY Mellon

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

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.