Correlation Between Bristol Myers and GlaxoSmithKline PLC

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

Diversification Opportunities for Bristol Myers and GlaxoSmithKline PLC

-0.93

Correlation Coefficient

Bristol Myers  GlaxoSmithKline PLC

Pay attention - limited upside

The 3 months correlation between Bristol and GlaxoSmithKline is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Bristol Myers i.e., Bristol Myers and GlaxoSmithKline PLC go up and down completely randomly.

Pair Corralation between Bristol Myers and GlaxoSmithKline PLC

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 2.1 times more return on investment than GlaxoSmithKline PLC. However, Bristol Myers is 2.1 times more volatile than GlaxoSmithKline PLC ADR. It trades about 0.17 of its potential returns per unit of risk. GlaxoSmithKline PLC ADR is currently generating about -0.24 per unit of risk. If you would invest  5,432  in Bristol Myers Squibb on September 2, 2024 and sell it today you would earn a total of  490.00  from holding Bristol Myers Squibb or generate 9.02% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  GlaxoSmithKline PLC ADR

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.

GlaxoSmithKline PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bristol Myers and GlaxoSmithKline PLC

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

The idea behind Bristol Myers Squibb and GlaxoSmithKline PLC ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.