Correlation Between Bristol Myers and Lineage Cell

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

Diversification Opportunities for Bristol Myers and Lineage Cell

0.11

Correlation Coefficient

Bristol Myers  Lineage Cell

Average diversification

The 3 months correlation between Bristol and Lineage is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell 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 Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Lineage Cell go up and down completely randomly.

Pair Corralation between Bristol Myers and Lineage Cell

Considering the 90-day investment horizon Bristol Myers is expected to generate 11.17 times less return on investment than Lineage Cell. But when comparing it to its historical volatility, Bristol Myers Squibb is 3.76 times less risky than Lineage Cell. It trades about 0.01 of its potential returns per unit of risk. Lineage Cell Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Lineage Cell Therapeutics on November 29, 2024 and sell it today you would earn a total of  1.32  from holding Lineage Cell Therapeutics or generate 2.32% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Lineage Cell 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.

Lineage Cell Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lineage Cell Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lineage Cell showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Lineage Cell

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

The idea behind Bristol Myers Squibb and Lineage Cell 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.