Correlation Between Universal Entertainment and Bank of New York Mellon

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

By analyzing existing cross correlation between Universal Entertainment and The Bank of, you can compare the effects of market volatilities on Universal Entertainment and Bank of New York 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 Universal Entertainment with a short position of Bank of New York Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and Bank of New York Mellon.

Diversification Opportunities for Universal Entertainment and Bank of New York Mellon

0.75

Correlation Coefficient

Universal Entertainment  Bank of New York Mellon

Poor diversification

The 3 months correlation between Universal and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York Mellon and Universal Entertainment 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 Universal Entertainment are associated (or correlated) with Bank of New York Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York Mellon has no effect on the direction of Universal Entertainment i.e., Universal Entertainment and Bank of New York Mellon go up and down completely randomly.

Pair Corralation between Universal Entertainment and Bank of New York Mellon

Assuming the 90 days trading horizon Universal Entertainment is expected to under-perform the Bank of New York Mellon. In addition to that, Universal Entertainment is 1.87 times more volatile than The Bank of. It trades about -0.01 of its total potential returns per unit of risk. The Bank of is currently generating about 0.14 per unit of volatility. If you would invest  7,646  in The Bank of on December 4, 2024 and sell it today you would earn a total of  886.00  from holding The Bank of or generate 11.59% return on investment over 90 days.

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

Universal Entertainment  vs.  The Bank of

Universal Entertainment

Risk-Adjusted Performance

Very Weak

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

Bank of New York Mellon

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of New York Mellon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Universal Entertainment and Bank of New York Mellon

The main advantage of trading using opposite Universal Entertainment and Bank of New York Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment position performs unexpectedly, Bank of New York 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 Bank of New York Mellon will offset losses from the drop in Bank of New York Mellon's long position.

The idea behind Universal Entertainment and The Bank of 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.