Correlation Between BNY Mellon and First Trust
Can any of the company-specific risk be diversified away by investing in both BNY Mellon and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BNY Mellon High and First Trust Senior, you can compare the effects of market volatilities on BNY Mellon and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and First Trust.
Diversification Opportunities for BNY Mellon and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BNY and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon High and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 High are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of BNY Mellon i.e., BNY Mellon and First Trust go up and down completely randomly.
Pair Corralation between BNY Mellon and First Trust
Given the investment horizon of 90 days BNY Mellon High is expected to generate 2.32 times more return on investment than First Trust. However, BNY Mellon is 2.32 times more volatile than First Trust Senior. It trades about 0.13 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.26 per unit of risk. If you would invest 4,098 in BNY Mellon High on August 26, 2024 and sell it today you would earn a total of 732.00 from holding BNY Mellon High or generate 17.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BNY Mellon High vs. First Trust Senior
Performance |
| Timeline |
| BNY Mellon High |
| First Trust Senior |
BNY Mellon and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BNY Mellon and First Trust
The main advantage of trading using opposite BNY Mellon and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNY Mellon position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| BNY Mellon vs. First Trust Senior | BNY Mellon vs. First Trust Low | BNY Mellon vs. First Trust Enhanced | BNY Mellon vs. First Trust TCW |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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