Correlation Between Bristol Myers and Meihua International

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

Diversification Opportunities for Bristol Myers and Meihua International

-0.65

Correlation Coefficient

Bristol Myers  Meihua International

Excellent diversification

The 3 months correlation between Bristol and Meihua is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Meihua International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meihua International 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 Meihua International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meihua International has no effect on the direction of Bristol Myers i.e., Bristol Myers and Meihua International go up and down completely randomly.

Pair Corralation between Bristol Myers and Meihua International

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.18 times more return on investment than Meihua International. However, Bristol Myers Squibb is 5.42 times less risky than Meihua International. It trades about -0.02 of its potential returns per unit of risk. Meihua International Medical is currently generating about -0.04 per unit of risk. If you would invest  6,794  in Bristol Myers Squibb on October 11, 2024 and sell it today you would lose (1,113) from holding Bristol Myers Squibb or give up 16.38% of portfolio value over 90 days.

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

Bristol Myers Squibb  vs.  Meihua International Medical

Bristol Myers Squibb

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 6 (%) 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 February 2025.

Meihua International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meihua International Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bristol Myers and Meihua International

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

The idea behind Bristol Myers Squibb and Meihua International Medical 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 CEOs Directory module to screen CEOs from public companies around the world.