Correlation Between Microsoft and Bny Mellon

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

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

Diversification Opportunities for Microsoft and Bny Mellon

-0.01

Correlation Coefficient

Microsoft  Bny Mellon

Good diversification

The 3 months correlation between Microsoft and Bny is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bny Mellon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon Small and Microsoft 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 Microsoft 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 Small has no effect on the direction of Microsoft i.e., Microsoft and Bny Mellon go up and down completely randomly.

Pair Corralation between Microsoft and Bny Mellon

Given the investment horizon of 90 days Microsoft is expected to under-perform the Bny Mellon. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.26 times less risky than Bny Mellon. The stock trades about -0.03 of its potential returns per unit of risk. The Bny Mellon Small is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,854  in Bny Mellon Small on September 30, 2024 and sell it today you would lose (38.00) from holding Bny Mellon Small or give up 2.05% of portfolio value over 90 days.

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

Microsoft  vs.  Bny Mellon Small

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Microsoft and Bny Mellon

The main advantage of trading using opposite Microsoft and Bny Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft and Bny Mellon Small 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..