Correlation Between BNY Mellon and Materials Select

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

By analyzing existing cross correlation between BNY Mellon High and Materials Select Sector, you can compare the effects of market volatilities on BNY Mellon and Materials Select 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 Materials Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of BNY Mellon and Materials Select.

Diversification Opportunities for BNY Mellon and Materials Select

0.59

Correlation Coefficient

BNY Mellon  Materials Select

Very weak diversification

The 3 months correlation between BNY and Materials is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BNY Mellon High and Materials Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Select Sector 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 High are associated (or correlated) with Materials Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Select Sector has no effect on the direction of BNY Mellon i.e., BNY Mellon and Materials Select go up and down completely randomly.

Pair Corralation between BNY Mellon and Materials Select

Considering the 90-day investment horizon BNY Mellon High is expected to generate 0.61 times more return on investment than Materials Select. However, BNY Mellon High is 1.64 times less risky than Materials Select. It trades about 0.17 of its potential returns per unit of risk. Materials Select Sector is currently generating about 0.1 per unit of risk. If you would invest  243.00  in BNY Mellon High on May 7, 2025 and sell it today you would earn a total of  16.00  from holding BNY Mellon High or generate 6.58% return on investment over 90 days.

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

BNY Mellon High  vs.  Materials Select Sector

BNY Mellon High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon High are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical indicators, BNY Mellon may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Materials Select Sector

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Select Sector are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Materials Select may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with BNY Mellon and Materials Select

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

The idea behind BNY Mellon High and Materials Select Sector 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.