Correlation Between Bristol Myers and Esperion Therapeutics

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

Diversification Opportunities for Bristol Myers and Esperion Therapeutics

0.15

Correlation Coefficient

Bristol Myers  Esperion Therapeutics

Average diversification

The 3 months correlation between Bristol and Esperion is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics 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 Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Esperion Therapeutics go up and down completely randomly.

Pair Corralation between Bristol Myers and Esperion Therapeutics

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.26 times more return on investment than Esperion Therapeutics. However, Bristol Myers Squibb is 3.91 times less risky than Esperion Therapeutics. It trades about -0.01 of its potential returns per unit of risk. Esperion Therapeutics is currently generating about -0.01 per unit of risk. If you would invest  6,319  in Bristol Myers Squibb on November 19, 2024 and sell it today you would lose (929.00) from holding Bristol Myers Squibb or give up 14.7% of portfolio value over 90 days.

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

Bristol Myers Squibb  vs.  Esperion Therapeutics

Bristol Myers Squibb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Bristol Myers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Esperion Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bristol Myers and Esperion Therapeutics

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

The idea behind Bristol Myers Squibb and Esperion Therapeutics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.