Correlation Between BNY Mellon and ProShares

Can any of the company-specific risk be diversified away by investing in both BNY Mellon and ProShares 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 ProShares 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 ProShares SP MidCap, you can compare the effects of market volatilities on BNY Mellon and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and ProShares.

Diversification Opportunities for BNY Mellon and ProShares

0.65

Correlation Coefficient

BNY Mellon  ProShares

Poor diversification

The 3 months correlation between BNY and ProShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon ETF and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP MidCap has no effect on the direction of BNY Mellon i.e., BNY Mellon and ProShares go up and down completely randomly.

Pair Corralation between BNY Mellon and ProShares

Given the investment horizon of 90 days BNY Mellon ETF is expected to generate 1.22 times more return on investment than ProShares. However, BNY Mellon is 1.22 times more volatile than ProShares SP MidCap. It trades about 0.03 of its potential returns per unit of risk. ProShares SP MidCap is currently generating about -0.03 per unit of risk. If you would invest  9,096  in BNY Mellon ETF on March 14, 2024 and sell it today you would earn a total of  139.00  from holding BNY Mellon ETF or generate 1.53% 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.  ProShares SP MidCap

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.

ProShares SP MidCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BNY Mellon and ProShares

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

The idea behind BNY Mellon ETF and ProShares SP MidCap 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.