Correlation Between Bristol Myers and Novavax

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

Diversification Opportunities for Bristol Myers and Novavax

-0.17

Correlation Coefficient

Bristol Myers  Novavax

Good diversification

The 3 months correlation between Bristol and Novavax is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Bristol Myers i.e., Bristol Myers and Novavax go up and down completely randomly.

Pair Corralation between Bristol Myers and Novavax

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.34 times more return on investment than Novavax. However, Bristol Myers Squibb is 2.94 times less risky than Novavax. It trades about 0.07 of its potential returns per unit of risk. Novavax is currently generating about -0.01 per unit of risk. If you would invest  5,545  in Bristol Myers Squibb on December 28, 2024 and sell it today you would earn a total of  345.00  from holding Bristol Myers Squibb or generate 6.22% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Novavax

Bristol Myers Squibb

Risk-Adjusted Performance

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 April 2025.

Novavax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novavax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Novavax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bristol Myers and Novavax

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

The idea behind Bristol Myers Squibb and Novavax 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.