Correlation Between Bristol Myers and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Abbott Laboratories 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 Abbott Laboratories 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 Abbott Laboratories, you can compare the effects of market volatilities on Bristol Myers and Abbott Laboratories 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 Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Abbott Laboratories.
Diversification Opportunities for Bristol Myers and Abbott Laboratories
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bristol and Abbott is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories 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 Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Bristol Myers i.e., Bristol Myers and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Bristol Myers and Abbott Laboratories
Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 2.36 times more return on investment than Abbott Laboratories. However, Bristol Myers is 2.36 times more volatile than Abbott Laboratories. It trades about 0.19 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.14 per unit of risk. If you would invest 5,264 in Bristol Myers Squibb on August 28, 2024 and sell it today you would earn a total of 614.00 from holding Bristol Myers Squibb or generate 11.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Abbott Laboratories
Performance |
| Timeline |
| Bristol Myers Squibb |
| Abbott Laboratories |
Bristol Myers and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol Myers and Abbott Laboratories
The main advantage of trading using opposite Bristol Myers and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.| Bristol Myers vs. Capricor Therapeutics | Bristol Myers vs. Soleno Therapeutics | Bristol Myers vs. Bio Path Holdings | Bristol Myers vs. Moleculin Biotech |
| Abbott Laboratories vs. AbbVie Inc | Abbott Laboratories vs. Eli Lilly and | Abbott Laboratories vs. Bristol Myers Squibb | Abbott Laboratories vs. Johnson Johnson |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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