Correlation Between Meta Platforms and Bristol-Myers Squibb
Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Bristol-Myers Squibb 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 Meta Platforms and Bristol-Myers Squibb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and Bristol Myers Squibb, you can compare the effects of market volatilities on Meta Platforms and Bristol-Myers Squibb 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 Meta Platforms with a short position of Bristol-Myers Squibb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Bristol-Myers Squibb.
Diversification Opportunities for Meta Platforms and Bristol-Myers Squibb
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Meta and Bristol-Myers is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb and Meta Platforms 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 Meta Platforms are associated (or correlated) with Bristol-Myers Squibb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Meta Platforms i.e., Meta Platforms and Bristol-Myers Squibb go up and down completely randomly.
Pair Corralation between Meta Platforms and Bristol-Myers Squibb
Given the investment horizon of 90 days Meta Platforms is expected to under-perform the Bristol-Myers Squibb. But the stock apears to be less risky and, when comparing its historical volatility, Meta Platforms is 2.49 times less risky than Bristol-Myers Squibb. The stock trades about -0.01 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.22 of returns per unit of risk over similar time horizon. 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 |
Meta Platforms vs. Bristol Myers Squibb
Performance |
| Timeline |
| Meta Platforms |
| Bristol Myers Squibb |
Meta Platforms and Bristol-Myers Squibb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Bristol-Myers Squibb
The main advantage of trading using opposite Meta Platforms and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Bristol-Myers Squibb 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 Bristol-Myers Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.| Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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