Correlation Between Bristol Myers and Hospital Mater

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Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Hospital Mater 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 Hospital Mater 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 Hospital Mater Dei, you can compare the effects of market volatilities on Bristol Myers and Hospital Mater 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 Hospital Mater. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Hospital Mater.

Diversification Opportunities for Bristol Myers and Hospital Mater

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Bristol and Hospital is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Hospital Mater Dei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hospital Mater Dei 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 Hospital Mater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hospital Mater Dei has no effect on the direction of Bristol Myers i.e., Bristol Myers and Hospital Mater go up and down completely randomly.

Pair Corralation between Bristol Myers and Hospital Mater

Assuming the 90 days trading horizon Bristol Myers Squibb is expected to generate 0.88 times more return on investment than Hospital Mater. However, Bristol Myers Squibb is 1.14 times less risky than Hospital Mater. It trades about 0.22 of its potential returns per unit of risk. Hospital Mater Dei is currently generating about -0.05 per unit of risk. If you would invest  26,433  in Bristol Myers Squibb on August 28, 2024 and sell it today you would earn a total of  7,698  from holding Bristol Myers Squibb or generate 29.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bristol Myers Squibb  vs.  Hospital Mater Dei

 Performance 
       Timeline  
Bristol Myers Squibb 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Bristol Myers sustained solid returns over the last few months and may actually be approaching a breakup point.
Hospital Mater Dei 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hospital Mater Dei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bristol Myers and Hospital Mater Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bristol Myers and Hospital Mater

The main advantage of trading using opposite Bristol Myers and Hospital Mater positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Hospital Mater 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 Hospital Mater will offset losses from the drop in Hospital Mater's long position.
The idea behind Bristol Myers Squibb and Hospital Mater Dei pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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