Correlation Between First American and Bny Mellon

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Can any of the company-specific risk be diversified away by investing in both First American 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 First American and Bny Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Funds and Bny Mellon New, you can compare the effects of market volatilities on First American 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 First American with a short position of Bny Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Bny Mellon.

Diversification Opportunities for First American and Bny Mellon

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Bny is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and Bny Mellon New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon New and First American 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 First American Funds 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 New has no effect on the direction of First American i.e., First American and Bny Mellon go up and down completely randomly.

Pair Corralation between First American and Bny Mellon

Assuming the 90 days horizon First American Funds is expected to generate 0.6 times more return on investment than Bny Mellon. However, First American Funds is 1.66 times less risky than Bny Mellon. It trades about 0.13 of its potential returns per unit of risk. Bny Mellon New is currently generating about 0.02 per unit of risk. If you would invest  99.00  in First American Funds on September 12, 2024 and sell it today you would earn a total of  1.00  from holding First American Funds or generate 1.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First American Funds  vs.  Bny Mellon New

 Performance 
       Timeline  
First American Funds 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in First American Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Bny Mellon New 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bny Mellon New are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Bny Mellon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First American and Bny Mellon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First American and Bny Mellon

The main advantage of trading using opposite First American and Bny Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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 First American Funds and Bny Mellon New 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.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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