Correlation Between Bristol Myers and Sonnet Biotherapeutics

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

Diversification Opportunities for Bristol Myers and Sonnet Biotherapeutics

-0.93

Correlation Coefficient

Bristol Myers  Sonnet Biotherapeutics

Pay attention - limited upside

The 3 months correlation between Bristol and Sonnet is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Sonnet Biotherapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonnet Biotherapeutics 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 Sonnet Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonnet Biotherapeutics has no effect on the direction of Bristol Myers i.e., Bristol Myers and Sonnet Biotherapeutics go up and down completely randomly.

Pair Corralation between Bristol Myers and Sonnet Biotherapeutics

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 0.26 times more return on investment than Sonnet Biotherapeutics. However, Bristol Myers Squibb is 3.81 times less risky than Sonnet Biotherapeutics. It trades about 0.0 of its potential returns per unit of risk. Sonnet Biotherapeutics Holdings is currently generating about -0.12 per unit of risk. If you would invest  6,009  in Bristol Myers Squibb on September 12, 2024 and sell it today you would lose (197.00) from holding Bristol Myers Squibb or give up 3.28% of portfolio value over 90 days.

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

Bristol Myers Squibb  vs.  Sonnet Biotherapeutics Holding

Bristol Myers Squibb

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Sonnet Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bristol Myers and Sonnet Biotherapeutics

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

The idea behind Bristol Myers Squibb and Sonnet Biotherapeutics Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.