Correlation Between United States and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Bristol Myers Squibb, you can compare the effects of market volatilities on United States 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 United States with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Bristol Myers.
Diversification Opportunities for United States and Bristol Myers
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Bristol is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Bristol Myers go up and down completely randomly.
Pair Corralation between United States and Bristol Myers
Given the investment horizon of 90 days United States is expected to generate 3.79 times less return on investment than Bristol Myers. In addition to that, United States is 1.11 times more volatile than Bristol Myers Squibb. It trades about 0.06 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.24 per unit of volatility. If you would invest 104,501 in Bristol Myers Squibb on August 31, 2024 and sell it today you would earn a total of 17,699 from holding Bristol Myers Squibb or generate 16.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Bristol Myers Squibb
Performance |
| Timeline |
| United States Steel |
| Bristol Myers Squibb |
United States and Bristol Myers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Bristol Myers
The main advantage of trading using opposite United States and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Delta Air Lines | United States vs. Grupo Carso SAB | United States vs. McEwen Mining | United States vs. Monster Beverage Corp |
| Bristol Myers vs. Micron Technology | Bristol Myers vs. Grupo Sports World | Bristol Myers vs. United States Steel | Bristol Myers vs. Cognizant Technology Solutions |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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