Correlation Between Bristol Myers and Sangamo Therapeutics

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

Diversification Opportunities for Bristol Myers and Sangamo Therapeutics

-0.31

Correlation Coefficient

Bristol Myers  Sangamo Therapeutics

Very good diversification

The 3 months correlation between Bristol and Sangamo is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Sangamo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangamo 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 Sangamo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangamo Therapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Sangamo Therapeutics go up and down completely randomly.

Pair Corralation between Bristol Myers and Sangamo Therapeutics

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.17 times more return on investment than Sangamo Therapeutics. However, Bristol Myers Squibb is 5.77 times less risky than Sangamo Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Sangamo Therapeutics is currently generating about -0.12 per unit of risk. If you would invest  5,545  in Bristol Myers Squibb on December 29, 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.  Sangamo Therapeutics

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.

Sangamo Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sangamo Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bristol Myers and Sangamo Therapeutics

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

The idea behind Bristol Myers Squibb and Sangamo 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.