Correlation Between Bristol Myers and Mesoblast

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

Diversification Opportunities for Bristol Myers and Mesoblast

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bristol and Mesoblast is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Mesoblast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesoblast 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 Mesoblast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesoblast has no effect on the direction of Bristol Myers i.e., Bristol Myers and Mesoblast go up and down completely randomly.

Pair Corralation between Bristol Myers and Mesoblast

Considering the 90-day investment horizon Bristol Myers is expected to generate 3.25 times less return on investment than Mesoblast. But when comparing it to its historical volatility, Bristol Myers Squibb is 2.58 times less risky than Mesoblast. It trades about 0.14 of its potential returns per unit of risk. Mesoblast is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  695.00  in Mesoblast on September 2, 2024 and sell it today you would earn a total of  463.00  from holding Mesoblast or generate 66.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bristol Myers Squibb  vs.  Mesoblast

 Performance 
       Timeline  
Bristol Myers Squibb 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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.
Mesoblast 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mesoblast are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Mesoblast displayed solid returns over the last few months and may actually be approaching a breakup point.

Bristol Myers and Mesoblast Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bristol Myers and Mesoblast

The main advantage of trading using opposite Bristol Myers and Mesoblast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myers position performs unexpectedly, Mesoblast 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 Mesoblast will offset losses from the drop in Mesoblast's long position.
The idea behind Bristol Myers Squibb and Mesoblast 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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