Correlation Between Bristol Myers and Amazon
Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Amazon 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 Amazon 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 Amazon Inc, you can compare the effects of market volatilities on Bristol Myers and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Amazon.
Diversification Opportunities for Bristol Myers and Amazon
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bristol and Amazon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Bristol Myers i.e., Bristol Myers and Amazon go up and down completely randomly.
Pair Corralation between Bristol Myers and Amazon
Assuming the 90 days trading horizon Bristol Myers is expected to generate 1.97 times less return on investment than Amazon. But when comparing it to its historical volatility, Bristol Myers Squibb is 1.2 times less risky than Amazon. It trades about 0.07 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 455,565 in Amazon Inc on October 20, 2024 and sell it today you would earn a total of 14,011 from holding Amazon Inc or generate 3.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Amazon Inc
Performance |
| Timeline |
| Bristol Myers Squibb |
| Amazon Inc |
Bristol Myers and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol Myers and Amazon
The main advantage of trading using opposite Bristol Myers and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Bristol Myers vs. Eli Lilly and | Bristol Myers vs. Roche Holding AG | Bristol Myers vs. Amgen Inc | Bristol Myers vs. Sanofi |
| Amazon vs. McEwen Mining | Amazon vs. Monster Beverage Corp | Amazon vs. Delta Air Lines | Amazon vs. Grupo Carso 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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