Correlation Between Amazon and Bristol-Myers Squibb
Can any of the company-specific risk be diversified away by investing in both Amazon and Bristol-Myers Squibb 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 Amazon and Bristol-Myers Squibb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Bristol Myers Squibb, you can compare the effects of market volatilities on Amazon and Bristol-Myers Squibb 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 Amazon with a short position of Bristol-Myers Squibb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Bristol-Myers Squibb.
Diversification Opportunities for Amazon and Bristol-Myers Squibb
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Bristol-Myers is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc are associated (or correlated) with Bristol-Myers Squibb. 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 Amazon i.e., Amazon and Bristol-Myers Squibb go up and down completely randomly.
Pair Corralation between Amazon and Bristol-Myers Squibb
Given the investment horizon of 90 days Amazon is expected to generate 2.03 times less return on investment than Bristol-Myers Squibb. But when comparing it to its historical volatility, Amazon Inc is 1.85 times less risky than Bristol-Myers Squibb. It trades about 0.2 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 84,453 in Bristol Myers Squibb on August 28, 2024 and sell it today you would earn a total of 16,102 from holding Bristol Myers Squibb or generate 19.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Amazon Inc vs. Bristol Myers Squibb
Performance |
| Timeline |
| Amazon Inc |
| Bristol Myers Squibb |
Amazon and Bristol-Myers Squibb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Bristol-Myers Squibb
The main advantage of trading using opposite Amazon and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Bristol-Myers Squibb 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 Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.The idea behind Amazon Inc and Bristol Myers Squibb 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.| Bristol-Myers Squibb vs. Novartis AG | Bristol-Myers Squibb vs. Bayer AG | Bristol-Myers Squibb vs. Astellas Pharma | Bristol-Myers Squibb vs. Roche Holding AG |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |