Correlation Between Alcoa Corp and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Bristol Myers 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 Alcoa Corp and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Bristol Myers Squibb, you can compare the effects of market volatilities on Alcoa Corp and Bristol Myers 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 Alcoa Corp with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Bristol Myers.
Diversification Opportunities for Alcoa Corp and Bristol Myers
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and Bristol is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Bristol Myers go up and down completely randomly.
Pair Corralation between Alcoa Corp and Bristol Myers
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.04 times less return on investment than Bristol Myers. In addition to that, Alcoa Corp is 1.06 times more volatile than Bristol Myers Squibb. It trades about 0.16 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.18 per unit of volatility. If you would invest 5,264 in Bristol Myers Squibb on August 29, 2024 and sell it today you would earn a total of 610.00 from holding Bristol Myers Squibb or generate 11.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Bristol Myers Squibb
Performance |
| Timeline |
| Alcoa Corp |
| Bristol Myers Squibb |
Alcoa Corp and Bristol Myers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Bristol Myers
The main advantage of trading using opposite Alcoa Corp and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Bristol Myers 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 Bristol Myers will offset losses from the drop in Bristol Myers' long position.| Alcoa Corp vs. Direxion Daily FTSE | Alcoa Corp vs. Dodge Global Stock | Alcoa Corp vs. Collegium Pharmaceutical | Alcoa Corp vs. Dreyfus Natural Resources |
| Bristol Myers vs. Pharvaris BV | Bristol Myers vs. Brinker International | Bristol Myers vs. Alcoa Corp | Bristol Myers vs. Direxion Daily FTSE |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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