Correlation Between Bristol Myers and Fibra Plus

Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Fibra Plus 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 Bristol Myers and Fibra Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bristol Myers Squibb and Fibra Plus, you can compare the effects of market volatilities on Bristol Myers and Fibra Plus 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 Bristol Myers with a short position of Fibra Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Fibra Plus.

Diversification Opportunities for Bristol Myers and Fibra Plus

0.02

Correlation Coefficient

Bristol Myers  Fibra Plus

Significant diversification

The 3 months correlation between Bristol and Fibra is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Fibra Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Plus and Bristol Myers 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 Bristol Myers Squibb are associated (or correlated) with Fibra Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Plus has no effect on the direction of Bristol Myers i.e., Bristol Myers and Fibra Plus go up and down completely randomly.

Pair Corralation between Bristol Myers and Fibra Plus

Assuming the 90 days trading horizon Bristol Myers Squibb is expected to generate 0.63 times more return on investment than Fibra Plus. However, Bristol Myers Squibb is 1.58 times less risky than Fibra Plus. It trades about 0.08 of its potential returns per unit of risk. Fibra Plus is currently generating about 0.03 per unit of risk. If you would invest  82,582  in Bristol Myers Squibb on October 20, 2024 and sell it today you would earn a total of  32,938  from holding Bristol Myers Squibb or generate 39.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Bristol Myers Squibb  vs.  Fibra Plus

Bristol Myers Squibb

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Fibra Plus

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fibra Plus are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibra Plus may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bristol Myers and Fibra Plus

The main advantage of trading using opposite Bristol Myers and Fibra Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Fibra Plus 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 Fibra Plus will offset losses from the drop in Fibra Plus' long position.

The idea behind Bristol Myers Squibb and Fibra Plus pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.