Correlation Between Bristol Myers and Nordic Semiconductor

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

Diversification Opportunities for Bristol Myers and Nordic Semiconductor

-0.55

Correlation Coefficient

Bristol Myers  Nordic Semiconductor

Excellent diversification

The 3 months correlation between Bristol and Nordic is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA 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 Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Bristol Myers i.e., Bristol Myers and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Bristol Myers and Nordic Semiconductor

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.63 times more return on investment than Nordic Semiconductor. However, Bristol Myers Squibb is 1.58 times less risky than Nordic Semiconductor. It trades about 0.13 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.07 per unit of risk. If you would invest  3,947  in Bristol Myers Squibb on October 13, 2024 and sell it today you would earn a total of  1,636  from holding Bristol Myers Squibb or generate 41.45% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Nordic Semiconductor ASA

Bristol Myers Squibb

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 5 (%) 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.

Nordic Semiconductor ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nordic Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bristol Myers and Nordic Semiconductor

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

The idea behind Bristol Myers Squibb and Nordic Semiconductor ASA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.