Correlation Between IShares Russell and BNY Mellon

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

By analyzing existing cross correlation between iShares Russell 3000 and BNY Mellon Core, you can compare the effects of market volatilities on IShares Russell 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 IShares Russell with a short position of BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and BNY Mellon.

Diversification Opportunities for IShares Russell and BNY Mellon

0.62

Correlation Coefficient

IShares Russell  BNY Mellon

Poor diversification

The 3 months correlation between IShares and BNY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 3000 and BNY Mellon Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Core and IShares Russell 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 iShares Russell 3000 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 Core has no effect on the direction of IShares Russell i.e., IShares Russell and BNY Mellon go up and down completely randomly.

Pair Corralation between IShares Russell and BNY Mellon

Considering the 90-day investment horizon iShares Russell 3000 is expected to generate 2.12 times more return on investment than BNY Mellon. However, IShares Russell is 2.12 times more volatile than BNY Mellon Core. It trades about 0.02 of its potential returns per unit of risk. BNY Mellon Core is currently generating about -0.05 per unit of risk. If you would invest  30,008  in iShares Russell 3000 on February 27, 2024 and sell it today you would earn a total of  195.00  from holding iShares Russell 3000 or generate 0.65% return on investment over 90 days.

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

iShares Russell 3000  vs.  BNY Mellon Core

iShares Russell 3000

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 3000 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BNY Mellon Core

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Core are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BNY Mellon is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Russell and BNY Mellon

The main advantage of trading using opposite IShares Russell and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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.

The idea behind iShares Russell 3000 and BNY Mellon Core 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.