Correlation Between Bristol Myers and Archer Daniels
Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Archer Daniels 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 Bristol Myers and Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bristol Myers Squibb and Archer Daniels Midland, you can compare the effects of market volatilities on Bristol Myers and Archer Daniels 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 Bristol Myers with a short position of Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Archer Daniels.
Diversification Opportunities for Bristol Myers and Archer Daniels
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bristol and Archer is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland and Bristol Myers 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 Bristol Myers Squibb are associated (or correlated) with Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Bristol Myers i.e., Bristol Myers and Archer Daniels go up and down completely randomly.
Pair Corralation between Bristol Myers and Archer Daniels
Assuming the 90 days trading horizon Bristol Myers Squibb is expected to under-perform the Archer Daniels. But the stock apears to be less risky and, when comparing its historical volatility, Bristol Myers Squibb is 1.05 times less risky than Archer Daniels. The stock trades about -0.08 of its potential returns per unit of risk. The Archer Daniels Midland is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 101,855 in Archer Daniels Midland on November 28, 2024 and sell it today you would lose (3,355) from holding Archer Daniels Midland or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Archer Daniels Midland
Performance |
| Timeline |
| Bristol Myers Squibb |
| Archer Daniels Midland |
Bristol Myers and Archer Daniels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol Myers and Archer Daniels
The main advantage of trading using opposite Bristol Myers and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.| Bristol Myers vs. Lloyds Banking Group | Bristol Myers vs. Desarrolladora Homex SAB | Bristol Myers vs. United States Steel | Bristol Myers vs. Grupo Hotelero Santa |
| Archer Daniels vs. FIBRA Storage | Archer Daniels vs. Verizon Communications | Archer Daniels vs. Micron Technology | Archer Daniels vs. GMxico Transportes SAB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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