Correlation Between GM and BNY Mellon
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and BNY Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and BNY Mellon High, you can compare the effects of market volatilities on GM 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 GM with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and BNY Mellon.
Diversification Opportunities for GM and BNY Mellon
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and BNY is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and BNY Mellon High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon High and GM 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 General Motors 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 High has no effect on the direction of GM i.e., GM and BNY Mellon go up and down completely randomly.
Pair Corralation between GM and BNY Mellon
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the BNY Mellon. In addition to that, GM is 12.5 times more volatile than BNY Mellon High. It trades about -0.05 of its total potential returns per unit of risk. BNY Mellon High is currently generating about 0.26 per unit of volatility. If you would invest 4,778 in BNY Mellon High on November 3, 2024 and sell it today you would earn a total of 60.00 from holding BNY Mellon High or generate 1.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. BNY Mellon High
Performance |
| Timeline |
| General Motors |
| BNY Mellon High |
GM and BNY Mellon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and BNY Mellon
The main advantage of trading using opposite GM and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and BNY Mellon High 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. BNY Mellon International | BNY Mellon vs. BNY Mellon ETF | BNY Mellon vs. BNY Mellon Mid | BNY Mellon vs. BNY Mellon Large |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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