Correlation Between Bristol Myers and Mersana Therapeutics
Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Mersana Therapeutics 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 Mersana Therapeutics 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 Mersana Therapeutics, you can compare the effects of market volatilities on Bristol Myers and Mersana Therapeutics 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 Mersana Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Mersana Therapeutics.
Diversification Opportunities for Bristol Myers and Mersana Therapeutics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bristol and Mersana is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Mersana Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersana Therapeutics 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 Mersana Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersana Therapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Mersana Therapeutics go up and down completely randomly.
Pair Corralation between Bristol Myers and Mersana Therapeutics
Considering the 90-day investment horizon Bristol Myers is expected to generate 3.15 times less return on investment than Mersana Therapeutics. But when comparing it to its historical volatility, Bristol Myers Squibb is 3.12 times less risky than Mersana Therapeutics. It trades about 0.17 of its potential returns per unit of risk. Mersana Therapeutics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 182.00 in Mersana Therapeutics on September 2, 2024 and sell it today you would earn a total of 46.00 from holding Mersana Therapeutics or generate 25.27% 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. Mersana Therapeutics
Performance |
| Timeline |
| Bristol Myers Squibb |
| Mersana Therapeutics |
Bristol Myers and Mersana Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol Myers and Mersana Therapeutics
The main advantage of trading using opposite Bristol Myers and Mersana Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Mersana Therapeutics 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 Mersana Therapeutics will offset losses from the drop in Mersana Therapeutics' long position.| Bristol Myers vs. AbbVie Inc | Bristol Myers vs. Merck Company | Bristol Myers vs. Gilead Sciences | Bristol Myers vs. Johnson Johnson |
| Mersana Therapeutics vs. Terns Pharmaceuticals | Mersana Therapeutics vs. Amylyx Pharmaceuticals | Mersana Therapeutics vs. Acumen Pharmaceuticals | Mersana Therapeutics vs. Inozyme Pharma |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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