Correlation Between Dow Jones and BNY Mellon
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and BNY Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and BNY Mellon Strategic, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BNY Mellon.
Diversification Opportunities for Dow Jones and BNY Mellon
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and BNY is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BNY Mellon Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Strategic and Dow Jones 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 Dow Jones Industrial 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 Strategic has no effect on the direction of Dow Jones i.e., Dow Jones and BNY Mellon go up and down completely randomly.
Pair Corralation between Dow Jones and BNY Mellon
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.9 times more return on investment than BNY Mellon. However, Dow Jones Industrial is 1.11 times less risky than BNY Mellon. It trades about 0.08 of its potential returns per unit of risk. BNY Mellon Strategic is currently generating about 0.04 per unit of risk. If you would invest 3,320,393 in Dow Jones Industrial on September 13, 2024 and sell it today you would earn a total of 1,071,019 from holding Dow Jones Industrial or generate 32.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. BNY Mellon Strategic
Performance |
| Timeline |
Dow Jones and BNY Mellon Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BNY Mellon Strategic
Pair trading matchups for BNY Mellon
Pair Trading with Dow Jones and BNY Mellon
The main advantage of trading using opposite Dow Jones and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| BNY Mellon vs. Blackrock Muniholdings Closed | BNY Mellon vs. DTF Tax Free | BNY Mellon vs. John Hancock Income | BNY Mellon vs. MFS Investment Grade |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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