Correlation Between Bank of New York and BlackRock

Can any of the company-specific risk be diversified away by investing in both Bank of New York and BlackRock 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 Bank of New York and BlackRock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of New and BlackRock, you can compare the effects of market volatilities on Bank of New York and BlackRock 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 Bank of New York with a short position of BlackRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and BlackRock.

Diversification Opportunities for Bank of New York and BlackRock

0.94

Correlation Coefficient

Bank of New York  BlackRock

Almost no diversification

The 12 months correlation between Bank and BlackRock is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Bank of New York 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 Bank of New are associated (or correlated) with BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Bank of New York i.e., Bank of New York and BlackRock go up and down completely randomly.

Pair Corralation between Bank of New York and BlackRock

Allowing for the 90-day total investment horizon Bank of New is expected to generate 0.8 times more return on investment than BlackRock. However, Bank of New is 1.25 times less risky than BlackRock. It trades about 0.07 of its potential returns per unit of risk. BlackRock is currently generating about -0.11 per unit of risk. If you would invest  5,564  in Bank of New on January 24, 2024 and sell it today you would earn a total of  152.00  from holding Bank of New or generate 2.73% return on investment over 90 days.

Time Period	12 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.62%
Values	Daily Returns

Bank of New  vs.  BlackRock

Bank of New York

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Bank of New York may actually be approaching a critical reversion point that can send shares even higher in May 2024.

BlackRock

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, BlackRock 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 Bank of New York and BlackRock

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

The idea behind Bank of New and BlackRock 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.