Correlation Between Bristol-Myers Squibb and Novartis
Can any of the company-specific risk be diversified away by investing in both Bristol-Myers Squibb and Novartis 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 Novartis 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 Novartis AG, you can compare the effects of market volatilities on Bristol-Myers Squibb and Novartis 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 Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol-Myers Squibb and Novartis.
Diversification Opportunities for Bristol-Myers Squibb and Novartis
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bristol-Myers and Novartis is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Novartis go up and down completely randomly.
Pair Corralation between Bristol-Myers Squibb and Novartis
Assuming the 90 days horizon Bristol-Myers Squibb is expected to generate 4.92 times less return on investment than Novartis. In addition to that, Bristol-Myers Squibb is 1.55 times more volatile than Novartis AG. It trades about 0.0 of its total potential returns per unit of risk. Novartis AG is currently generating about 0.03 per unit of volatility. If you would invest 8,047 in Novartis AG on August 27, 2024 and sell it today you would earn a total of 2,353 from holding Novartis AG or generate 29.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 48.78% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Novartis AG
Performance |
| Timeline |
| Bristol Myers Squibb |
| Novartis AG |
Bristol-Myers Squibb and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol-Myers Squibb and Novartis
The main advantage of trading using opposite Bristol-Myers Squibb and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol-Myers Squibb position performs unexpectedly, Novartis 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 Novartis will offset losses from the drop in Novartis' 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 |
| Novartis vs. AstraZeneca PLC | Novartis vs. Roche Holding Ltd | Novartis vs. Sanofi ADR | Novartis vs. Bristol Myers Squibb |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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