Correlation Between Bristol Myers and Atea Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Bristol Myers and Atea Pharmaceuticals 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 Atea Pharmaceuticals 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 Atea Pharmaceuticals, you can compare the effects of market volatilities on Bristol Myers and Atea Pharmaceuticals 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 Atea Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bristol Myers and Atea Pharmaceuticals.

Diversification Opportunities for Bristol Myers and Atea Pharmaceuticals

-0.68

Correlation Coefficient

Bristol Myers  Atea Pharmaceuticals

Excellent diversification

The 3 months correlation between Bristol and Atea is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Atea Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea Pharmaceuticals 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 Atea Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea Pharmaceuticals has no effect on the direction of Bristol Myers i.e., Bristol Myers and Atea Pharmaceuticals go up and down completely randomly.

Pair Corralation between Bristol Myers and Atea Pharmaceuticals

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.75 times more return on investment than Atea Pharmaceuticals. However, Bristol Myers Squibb is 1.33 times less risky than Atea Pharmaceuticals. It trades about 0.14 of its potential returns per unit of risk. Atea Pharmaceuticals is currently generating about -0.02 per unit of risk. If you would invest  4,996  in Bristol Myers Squibb on September 2, 2024 and sell it today you would earn a total of  926.00  from holding Bristol Myers Squibb or generate 18.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bristol Myers Squibb  vs.  Atea Pharmaceuticals

Bristol Myers Squibb

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Atea Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atea Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Atea Pharmaceuticals is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bristol Myers and Atea Pharmaceuticals

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

The idea behind Bristol Myers Squibb and Atea Pharmaceuticals 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.