Correlation Between Bristol-Myers Squibb and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Bristol-Myers Squibb and Meta Platforms 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 Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on Bristol-Myers Squibb and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol-Myers Squibb and Meta Platforms.
Diversification Opportunities for Bristol-Myers Squibb and Meta Platforms
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bristol-Myers and Meta is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Meta Platforms go up and down completely randomly.
Pair Corralation between Bristol-Myers Squibb and Meta Platforms
Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 2.49 times more return on investment than Meta Platforms. However, Bristol-Myers Squibb is 2.49 times more volatile than Meta Platforms. It trades about 0.22 of its potential returns per unit of risk. Meta Platforms is currently generating about -0.01 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 | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Meta Platforms
Performance |
| Timeline |
| Bristol Myers Squibb |
| Meta Platforms |
Bristol-Myers Squibb and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol-Myers Squibb and Meta Platforms
The main advantage of trading using opposite Bristol-Myers Squibb and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol-Myers Squibb position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' 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 |
| Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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