Correlation Between Bristol Myers and Utah Medical

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

Diversification Opportunities for Bristol Myers and Utah Medical

-0.09

Correlation Coefficient

Bristol Myers  Utah Medical

Good diversification

The 3 months correlation between Bristol and Utah is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Utah Medical Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utah Medical Products 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 Utah Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utah Medical Products has no effect on the direction of Bristol Myers i.e., Bristol Myers and Utah Medical go up and down completely randomly.

Pair Corralation between Bristol Myers and Utah Medical

Considering the 90-day investment horizon Bristol Myers Squibb is expected to generate 1.88 times more return on investment than Utah Medical. However, Bristol Myers is 1.88 times more volatile than Utah Medical Products. It trades about 0.1 of its potential returns per unit of risk. Utah Medical Products is currently generating about -0.02 per unit of risk. If you would invest  5,135  in Bristol Myers Squibb on October 25, 2024 and sell it today you would earn a total of  574.00  from holding Bristol Myers Squibb or generate 11.18% 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.  Utah Medical Products

Bristol Myers Squibb

Risk-Adjusted Performance

7 of 100

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 February 2025.

Utah Medical Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utah Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Utah Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bristol Myers and Utah Medical

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

The idea behind Bristol Myers Squibb and Utah Medical Products 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.