Correlation Between Bristol-Myers Squibb and Sanofi ADR
Can any of the company-specific risk be diversified away by investing in both Bristol-Myers Squibb and Sanofi ADR 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 Sanofi ADR 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 Sanofi ADR, you can compare the effects of market volatilities on Bristol-Myers Squibb and Sanofi ADR 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 Sanofi ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol-Myers Squibb and Sanofi ADR.
Diversification Opportunities for Bristol-Myers Squibb and Sanofi ADR
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bristol-Myers and Sanofi is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Sanofi ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanofi ADR 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 Sanofi ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanofi ADR has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Sanofi ADR go up and down completely randomly.
Pair Corralation between Bristol-Myers Squibb and Sanofi ADR
Assuming the 90 days horizon Bristol Myers Squibb is expected to under-perform the Sanofi ADR. In addition to that, Bristol-Myers Squibb is 3.43 times more volatile than Sanofi ADR. It trades about -0.08 of its total potential returns per unit of risk. Sanofi ADR is currently generating about 0.21 per unit of volatility. If you would invest 5,151 in Sanofi ADR on November 23, 2024 and sell it today you would earn a total of 295.00 from holding Sanofi ADR or generate 5.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 50.0% |
Values | Daily Returns |
Bristol Myers Squibb vs. Sanofi ADR
Performance |
Timeline |
Bristol Myers Squibb |
Sanofi ADR |
Bristol-Myers Squibb and Sanofi ADR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bristol-Myers Squibb and Sanofi ADR
The main advantage of trading using opposite Bristol-Myers Squibb and Sanofi ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol-Myers Squibb position performs unexpectedly, Sanofi ADR 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 Sanofi ADR will offset losses from the drop in Sanofi ADR's long position.Bristol-Myers Squibb vs. Novartis AG | ||
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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