Correlation Between Bristol Myers and Cronos

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

Diversification Opportunities for Bristol Myers and Cronos

-0.41

Correlation Coefficient

Bristol Myers  Cronos

Very good diversification

The 3 months correlation between Bristol and Cronos is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos Group has no effect on the direction of Bristol Myers i.e., Bristol Myers and Cronos go up and down completely randomly.

Pair Corralation between Bristol Myers and Cronos

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.65 times more return on investment than Cronos. However, Bristol Myers Squibb is 1.53 times less risky than Cronos. It trades about 0.07 of its potential returns per unit of risk. Cronos Group is currently generating about -0.03 per unit of risk. If you would invest  5,545  in Bristol Myers Squibb on December 29, 2024 and sell it today you would earn a total of  345.00  from holding Bristol Myers Squibb or generate 6.22% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Cronos Group

Bristol Myers Squibb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Bristol Myers may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cronos Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cronos Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cronos is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bristol Myers and Cronos

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

The idea behind Bristol Myers Squibb and Cronos Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.