Correlation Between SPDR Series and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both SPDR Series 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 SPDR Series and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Series Trust and Bristol Myers Squibb, you can compare the effects of market volatilities on SPDR Series 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 SPDR Series with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Series and Bristol Myers.
Diversification Opportunities for SPDR Series and Bristol Myers
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Bristol is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust 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 SPDR Series 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 SPDR Series Trust 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 SPDR Series i.e., SPDR Series and Bristol Myers go up and down completely randomly.
Pair Corralation between SPDR Series and Bristol Myers
Assuming the 90 days trading horizon SPDR Series Trust is expected to generate 0.59 times more return on investment than Bristol Myers. However, SPDR Series Trust is 1.68 times less risky than Bristol Myers. It trades about 0.37 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.17 per unit of risk. If you would invest 262,000 in SPDR Series Trust on September 2, 2024 and sell it today you would earn a total of 39,100 from holding SPDR Series Trust or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Series Trust vs. Bristol Myers Squibb
Performance |
| Timeline |
| SPDR Series Trust |
| Bristol Myers Squibb |
SPDR Series and Bristol Myers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Series and Bristol Myers
The main advantage of trading using opposite SPDR Series and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series 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.| SPDR Series vs. SPDR Dow Jones | SPDR Series vs. SPDR Gold Trust | SPDR Series vs. SPDR SP 500 | SPDR Series vs. SPDR SP Regional |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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