Correlation Between Bristol-Myers Squibb and Amazon
Can any of the company-specific risk be diversified away by investing in both Bristol-Myers Squibb and Amazon 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 Squibb and Amazon 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 Amazon Inc, you can compare the effects of market volatilities on Bristol-Myers Squibb and Amazon 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 Squibb with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol-Myers Squibb and Amazon.
Diversification Opportunities for Bristol-Myers Squibb and Amazon
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bristol-Myers and Amazon is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Bristol-Myers Squibb 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Amazon go up and down completely randomly.
Pair Corralation between Bristol-Myers Squibb and Amazon
Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 1.85 times more return on investment than Amazon. However, Bristol-Myers Squibb is 1.85 times more volatile than Amazon Inc. It trades about 0.22 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.2 per unit of risk. If you would invest 84,453 in Bristol Myers Squibb on August 28, 2024 and sell it today you would earn a total of 16,102 from holding Bristol Myers Squibb or generate 19.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Amazon Inc
Performance |
| Timeline |
| Bristol Myers Squibb |
| Amazon Inc |
Bristol-Myers Squibb and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol-Myers Squibb and Amazon
The main advantage of trading using opposite Bristol-Myers Squibb and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol-Myers Squibb position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Bristol-Myers Squibb vs. Novartis AG | Bristol-Myers Squibb vs. Bayer AG | Bristol-Myers Squibb vs. Astellas Pharma | Bristol-Myers Squibb vs. Roche Holding AG |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |