Correlation Between BNY Mellon and SPDR SP

Can any of the company-specific risk be diversified away by investing in both BNY Mellon and SPDR SP 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 BNY Mellon and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BNY Mellon ETF and SPDR SP Emerging, you can compare the effects of market volatilities on BNY Mellon and SPDR SP 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 BNY Mellon with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and SPDR SP.

Diversification Opportunities for BNY Mellon and SPDR SP

0.61

Correlation Coefficient

BNY Mellon  SPDR SP

Poor diversification

The 3 months correlation between BNY and SPDR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon ETF and SPDR SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Emerging and BNY Mellon 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 BNY Mellon ETF are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Emerging has no effect on the direction of BNY Mellon i.e., BNY Mellon and SPDR SP go up and down completely randomly.

Pair Corralation between BNY Mellon and SPDR SP

Given the investment horizon of 90 days BNY Mellon is expected to generate 2.29 times less return on investment than SPDR SP. In addition to that, BNY Mellon is 1.5 times more volatile than SPDR SP Emerging. It trades about 0.03 of its total potential returns per unit of risk. SPDR SP Emerging is currently generating about 0.1 per unit of volatility. If you would invest  3,370  in SPDR SP Emerging on March 14, 2024 and sell it today you would earn a total of  139.00  from holding SPDR SP Emerging or generate 4.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BNY Mellon ETF  vs.  SPDR SP Emerging

BNY Mellon ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BNY Mellon is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR SP Emerging

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Emerging are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, SPDR SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BNY Mellon and SPDR SP

The main advantage of trading using opposite BNY Mellon and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNY Mellon position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.

The idea behind BNY Mellon ETF and SPDR SP Emerging 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.