Correlation Between Bristol Myers and Roche Holding

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

Diversification Opportunities for Bristol Myers and Roche Holding

0.61

Correlation Coefficient

Bristol Myers  Roche Holding

Poor diversification

The 3 months correlation between Bristol and Roche is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Bristol Myers i.e., Bristol Myers and Roche Holding go up and down completely randomly.

Pair Corralation between Bristol Myers and Roche Holding

Considering the 90-day investment horizon Bristol Myers is expected to generate 2.09 times less return on investment than Roche Holding. In addition to that, Bristol Myers is 1.15 times more volatile than Roche Holding Ltd. It trades about 0.09 of its total potential returns per unit of risk. Roche Holding Ltd is currently generating about 0.21 per unit of volatility. If you would invest  3,516  in Roche Holding Ltd on December 28, 2024 and sell it today you would earn a total of  676.00  from holding Roche Holding Ltd or generate 19.23% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Roche Holding Ltd

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 7 (%) 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.

Roche Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roche Holding Ltd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Roche Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Roche Holding

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

The idea behind Bristol Myers Squibb and Roche Holding Ltd 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.