Correlation Between Small Cap and Bny Mellon
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Bny Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Series and Bny Mellon Small, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Bny Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Bny Mellon.
Diversification Opportunities for Small Cap and Bny Mellon
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Bny is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Bny Mellon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon Small and Small Cap 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 Small Cap Value Series 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 Small has no effect on the direction of Small Cap i.e., Small Cap and Bny Mellon go up and down completely randomly.
Pair Corralation between Small Cap and Bny Mellon
Assuming the 90 days horizon Small Cap Value Series is expected to generate 1.01 times more return on investment than Bny Mellon. However, Small Cap is 1.01 times more volatile than Bny Mellon Small. It trades about 0.11 of its potential returns per unit of risk. Bny Mellon Small is currently generating about 0.09 per unit of risk. If you would invest 1,382 in Small Cap Value Series on August 26, 2024 and sell it today you would earn a total of 474.00 from holding Small Cap Value Series or generate 34.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Series vs. Bny Mellon Small
Performance |
| Timeline |
| Small Cap Value |
| Bny Mellon Small |
Small Cap and Bny Mellon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Bny Mellon
The main advantage of trading using opposite Small Cap and Bny Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Lord Abbett Trust | Small Cap vs. Lord Abbett Trust | Small Cap vs. Lord Abbett Focused | Small Cap vs. Floating Rate Fund |
| Bny Mellon vs. Ultramid Cap Profund Ultramid Cap | Bny Mellon vs. Mid Cap Value Profund | Bny Mellon vs. Small Cap Value Series | Bny Mellon vs. Amg River Road |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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