Correlation Between Bank of New York and Virtu Financial

Can any of the company-specific risk be diversified away by investing in both Bank of New York and Virtu Financial 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 Virtu Financial 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 Virtu Financial, you can compare the effects of market volatilities on Bank of New York and Virtu Financial 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 Virtu Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and Virtu Financial.

Diversification Opportunities for Bank of New York and Virtu Financial

0.79

Correlation Coefficient

Bank of New York  Virtu Financial

Poor diversification

The 3 months correlation between Bank and Virtu is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of New and Virtu Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtu Financial 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 Virtu Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtu Financial has no effect on the direction of Bank of New York i.e., Bank of New York and Virtu Financial go up and down completely randomly.

Pair Corralation between Bank of New York and Virtu Financial

Allowing for the 90-day total investment horizon Bank of New York is expected to generate 3.92 times less return on investment than Virtu Financial. But when comparing it to its historical volatility, Bank of New is 1.73 times less risky than Virtu Financial. It trades about 0.15 of its potential returns per unit of risk. Virtu Financial is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,656  in Virtu Financial on February 19, 2024 and sell it today you would earn a total of  690.00  from holding Virtu Financial or generate 41.67% return on investment over 90 days.

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

Bank of New  vs.  Virtu Financial

Bank of New York

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile forward-looking signals, Bank of New York may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Virtu Financial

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Virtu Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of New York and Virtu Financial

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

The idea behind Bank of New and Virtu Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.