Correlation Between Vanguard World and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Vanguard World 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 Vanguard World and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and Bristol Myers Squibb, you can compare the effects of market volatilities on Vanguard World 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 Vanguard World with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and Bristol Myers.
Diversification Opportunities for Vanguard World and Bristol Myers
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Vanguard and Bristol is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World 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 Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and Bristol Myers go up and down completely randomly.
Pair Corralation between Vanguard World and Bristol Myers
Assuming the 90 days trading horizon Vanguard World is expected to under-perform the Bristol Myers. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard World is 3.92 times less risky than Bristol Myers. The etf trades about -0.02 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 110,500 in Bristol Myers Squibb on September 2, 2024 and sell it today you would earn a total of 11,700 from holding Bristol Myers Squibb or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard World vs. Bristol Myers Squibb
Performance |
| Timeline |
| Vanguard World |
| Bristol Myers Squibb |
Vanguard World and Bristol Myers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard World and Bristol Myers
The main advantage of trading using opposite Vanguard World and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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.| Vanguard World vs. Vanguard Funds Public | Vanguard World vs. Vanguard Specialized Funds | Vanguard World vs. Vanguard World | Vanguard World vs. Vanguard Index Funds |
| Bristol Myers vs. Verizon Communications | Bristol Myers vs. First Republic Bank | Bristol Myers vs. UnitedHealth Group Incorporated | Bristol Myers vs. Prudential Financial |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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