Correlation Between Bristol Myers and Chugai Pharmaceutical

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

Diversification Opportunities for Bristol Myers and Chugai Pharmaceutical

-0.7

Correlation Coefficient

Bristol Myers  Chugai Pharmaceutical

Excellent diversification

The 3 months correlation between Bristol and Chugai is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Chugai Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chugai Pharmaceutical 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 Chugai Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chugai Pharmaceutical has no effect on the direction of Bristol Myers i.e., Bristol Myers and Chugai Pharmaceutical go up and down completely randomly.

Pair Corralation between Bristol Myers and Chugai Pharmaceutical

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.82 times more return on investment than Chugai Pharmaceutical. However, Bristol Myers Squibb is 1.23 times less risky than Chugai Pharmaceutical. It trades about 0.1 of its potential returns per unit of risk. Chugai Pharmaceutical Co is currently generating about -0.06 per unit of risk. If you would invest  4,944  in Bristol Myers Squibb on September 15, 2024 and sell it today you would earn a total of  634.00  from holding Bristol Myers Squibb or generate 12.82% 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.  Chugai Pharmaceutical Co

Bristol Myers Squibb

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Chugai Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chugai Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bristol Myers and Chugai Pharmaceutical

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

The idea behind Bristol Myers Squibb and Chugai Pharmaceutical Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.