Correlation Between Novartis and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Novartis and Bristol Myers 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 Novartis and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and Bristol Myers Squibb, you can compare the effects of market volatilities on Novartis and Bristol Myers 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 Novartis with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Bristol Myers.
Diversification Opportunities for Novartis and Bristol Myers
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novartis and Bristol is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG 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 Novartis 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 Novartis AG are associated (or correlated) with Bristol Myers. 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 Novartis i.e., Novartis and Bristol Myers go up and down completely randomly.
Pair Corralation between Novartis and Bristol Myers
Assuming the 90 days horizon Novartis AG is expected to generate 0.64 times more return on investment than Bristol Myers. However, Novartis AG is 1.56 times less risky than Bristol Myers. It trades about 0.03 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.0 per unit of risk. If you would invest 8,205 in Novartis AG on August 24, 2024 and sell it today you would earn a total of 1,620 from holding Novartis AG or generate 19.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 48.44% |
| Values | Daily Returns |
Novartis AG vs. Bristol Myers Squibb
Performance |
| Timeline |
| Novartis AG |
| Bristol Myers Squibb |
Novartis and Bristol Myers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Bristol Myers
The main advantage of trading using opposite Novartis and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Bristol Myers 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 will offset losses from the drop in Bristol Myers' long position.| Novartis vs. Ono Pharmaceutical Co | Novartis vs. GSK plc | Novartis vs. Grifols SA ADR | Novartis vs. Pfizer Inc |
| Bristol Myers vs. Novartis AG | Bristol Myers vs. Bayer AG | Bristol Myers vs. Astellas Pharma | Bristol Myers 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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