Correlation Between SPDR SP and BNY Mellon

Can any of the company-specific risk be diversified away by investing in both SPDR 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 SPDR 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 SPDR SP 500 and BNY Mellon Mid, you can compare the effects of market volatilities on SPDR 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 SPDR SP with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and BNY Mellon.

Diversification Opportunities for SPDR SP and BNY Mellon

0.97

Correlation Coefficient

SPDR SP  BNY Mellon

Almost no diversification

The 3 months correlation between SPDR and BNY is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and BNY Mellon Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Mid and SPDR 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 SPDR SP 500 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 Mid has no effect on the direction of SPDR SP i.e., SPDR SP and BNY Mellon go up and down completely randomly.

Pair Corralation between SPDR SP and BNY Mellon

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.82 times more return on investment than BNY Mellon. However, SPDR SP 500 is 1.22 times less risky than BNY Mellon. It trades about 0.12 of its potential returns per unit of risk. BNY Mellon Mid is currently generating about 0.08 per unit of risk. If you would invest  37,847  in SPDR SP 500 on September 5, 2024 and sell it today you would earn a total of  22,544  from holding SPDR SP 500 or generate 59.57% return on investment over 90 days.

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

SPDR SP 500  vs.  BNY Mellon Mid

SPDR SP 500

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BNY Mellon Mid

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Mid are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, BNY Mellon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and BNY Mellon

The main advantage of trading using opposite SPDR SP and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR 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 SPDR SP 500 and BNY Mellon Mid 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.