Correlation Between Bristol Myers and Relay Therapeutics

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

Diversification Opportunities for Bristol Myers and Relay Therapeutics

-0.83

Correlation Coefficient

Bristol Myers  Relay Therapeutics

Pay attention - limited upside

The 3 months correlation between Bristol and Relay is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Relay Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relay Therapeutics 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 Relay Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relay Therapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Relay Therapeutics go up and down completely randomly.

Pair Corralation between Bristol Myers and Relay Therapeutics

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.26 times more return on investment than Relay Therapeutics. However, Bristol Myers Squibb is 3.79 times less risky than Relay Therapeutics. It trades about 0.14 of its potential returns per unit of risk. Relay Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  4,996  in Bristol Myers Squibb on September 2, 2024 and sell it today you would earn a total of  926.00  from holding Bristol Myers Squibb or generate 18.53% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Relay Therapeutics

Bristol Myers Squibb

Risk-Adjusted Performance

11 of 100

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.

Relay Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relay Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bristol Myers and Relay Therapeutics

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

The idea behind Bristol Myers Squibb and Relay Therapeutics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.