Correlation Between Bristol Myers and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin, you can compare the effects of market volatilities on Bristol Myers and Lockheed Martin 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 Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Lockheed Martin.
Diversification Opportunities for Bristol Myers and Lockheed Martin
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bristol and Lockheed is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Bristol Myers i.e., Bristol Myers and Lockheed Martin go up and down completely randomly.
Pair Corralation between Bristol Myers and Lockheed Martin
Assuming the 90 days trading horizon Bristol Myers Squibb is expected to generate 1.14 times more return on investment than Lockheed Martin. However, Bristol Myers is 1.14 times more volatile than Lockheed Martin. It trades about 0.12 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.06 per unit of risk. If you would invest 98,414 in Bristol Myers Squibb on November 2, 2024 and sell it today you would earn a total of 26,586 from holding Bristol Myers Squibb or generate 27.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Lockheed Martin
Performance |
| Timeline |
| Bristol Myers Squibb |
| Lockheed Martin |
Bristol Myers and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol Myers and Lockheed Martin
The main advantage of trading using opposite Bristol Myers and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin'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 |
| Lockheed Martin vs. Genworth Financial | Lockheed Martin vs. Grupo Carso SAB | Lockheed Martin vs. Verizon Communications | Lockheed Martin vs. Cognizant Technology Solutions |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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