Correlation Between Bristol Myers and Baxter International
Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Baxter International 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 Baxter International 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 Baxter International, you can compare the effects of market volatilities on Bristol Myers and Baxter International 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 Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Baxter International.
Diversification Opportunities for Bristol Myers and Baxter International
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bristol and Baxter is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Bristol Myers i.e., Bristol Myers and Baxter International go up and down completely randomly.
Pair Corralation between Bristol Myers and Baxter International
Assuming the 90 days trading horizon Bristol Myers Squibb is expected to generate 1.69 times more return on investment than Baxter International. However, Bristol Myers is 1.69 times more volatile than Baxter International. It trades about 0.2 of its potential returns per unit of risk. Baxter International is currently generating about 0.06 per unit of risk. If you would invest 70,532 in Bristol Myers Squibb on September 3, 2024 and sell it today you would earn a total of 51,668 from holding Bristol Myers Squibb or generate 73.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Baxter International
Performance |
| Timeline |
| Bristol Myers Squibb |
| Baxter International |
Bristol Myers and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol Myers and Baxter International
The main advantage of trading using opposite Bristol Myers and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.| Bristol Myers vs. Eli Lilly and | Bristol Myers vs. Merck Company | Bristol Myers vs. Roche Holding AG | Bristol Myers vs. Amgen Inc |
| Baxter International vs. Monster Beverage Corp | Baxter International vs. Capital One Financial | Baxter International vs. McEwen Mining | Baxter International vs. Samsung Electronics Co |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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