Correlation Between Bristol-Myers Squibb and Roche Holding
Can any of the company-specific risk be diversified away by investing in both Bristol-Myers Squibb and Roche Holding 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 Roche Holding 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 Roche Holding AG, you can compare the effects of market volatilities on Bristol-Myers Squibb and Roche Holding 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 Roche Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol-Myers Squibb and Roche Holding.
Diversification Opportunities for Bristol-Myers Squibb and Roche Holding
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bristol-Myers and Roche is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Roche Holding go up and down completely randomly.
Pair Corralation between Bristol-Myers Squibb and Roche Holding
Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 2.52 times more return on investment than Roche Holding. However, Bristol-Myers Squibb is 2.52 times more volatile than Roche Holding AG. It trades about 0.12 of its potential returns per unit of risk. Roche Holding AG is currently generating about -0.16 per unit of risk. If you would invest 80,055 in Bristol Myers Squibb on August 31, 2024 and sell it today you would earn a total of 20,500 from holding Bristol Myers Squibb or generate 25.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.83% |
| Values | Daily Returns |
Bristol Myers Squibb vs. Roche Holding AG
Performance |
| Timeline |
| Bristol Myers Squibb |
| Roche Holding AG |
Bristol-Myers Squibb and Roche Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bristol-Myers Squibb and Roche Holding
The main advantage of trading using opposite Bristol-Myers Squibb and Roche Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol-Myers Squibb position performs unexpectedly, Roche Holding 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 Roche Holding will offset losses from the drop in Roche Holding'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 |
| Roche Holding vs. AstraZeneca PLC | Roche Holding vs. Roche Holding AG | Roche Holding vs. Roche Holding Ltd | Roche Holding vs. Grifols SA ADR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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