Correlation Between Bny Mellon and Vanguard Small-cap

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

By analyzing existing cross correlation between Bny Mellon Small and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Bny Mellon and Vanguard Small-cap 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 Bny Mellon with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bny Mellon and Vanguard Small-cap.

Diversification Opportunities for Bny Mellon and Vanguard Small-cap

0.48

Correlation Coefficient

Bny Mellon  Vanguard Small-cap

Very weak diversification

The 3 months correlation between Bny and Vanguard is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bny Mellon Small and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Bny Mellon 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 Bny Mellon Small are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Bny Mellon i.e., Bny Mellon and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Bny Mellon and Vanguard Small-cap

Assuming the 90 days horizon Bny Mellon is expected to generate 5.94 times less return on investment than Vanguard Small-cap. In addition to that, Bny Mellon is 1.04 times more volatile than Vanguard Small Cap Growth. It trades about 0.01 of its total potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.05 per unit of volatility. If you would invest  7,775  in Vanguard Small Cap Growth on October 22, 2024 and sell it today you would earn a total of  2,421  from holding Vanguard Small Cap Growth or generate 31.14% return on investment over 90 days.

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

Bny Mellon Small  vs.  Vanguard Small Cap Growth

Bny Mellon Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bny Mellon Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Bny Mellon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bny Mellon and Vanguard Small-cap

The main advantage of trading using opposite Bny Mellon and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bny Mellon position performs unexpectedly, Vanguard Small-cap 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 Vanguard Small-cap will offset losses from the drop in Vanguard Small-cap's long position.

The idea behind Bny Mellon Small and Vanguard Small Cap Growth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.