Correlation Between Ford and BNY Mellon
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and BNY Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BNY Mellon International, you can compare the effects of market volatilities on Ford 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 Ford with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BNY Mellon.
Diversification Opportunities for Ford and BNY Mellon
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and BNY is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BNY Mellon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon International and Ford 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 Ford Motor 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 International has no effect on the direction of Ford i.e., Ford and BNY Mellon go up and down completely randomly.
Pair Corralation between Ford and BNY Mellon
Taking into account the 90-day investment horizon Ford is expected to generate 1.9 times less return on investment than BNY Mellon. In addition to that, Ford is 2.75 times more volatile than BNY Mellon International. It trades about 0.01 of its total potential returns per unit of risk. BNY Mellon International is currently generating about 0.06 per unit of volatility. If you would invest 5,993 in BNY Mellon International on August 26, 2024 and sell it today you would earn a total of 1,422 from holding BNY Mellon International or generate 23.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. BNY Mellon International
Performance |
| Timeline |
| Ford Motor |
| BNY Mellon International |
Ford and BNY Mellon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BNY Mellon
The main advantage of trading using opposite Ford and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and BNY Mellon International 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.| BNY Mellon vs. Dimensional Core Equity | BNY Mellon vs. Dimensional Emerging Core | BNY Mellon vs. Dimensional Targeted Value | BNY Mellon vs. Dimensional Small Cap |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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