Correlation Between Bristol Myers and Micron Technology

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

Diversification Opportunities for Bristol Myers and Micron Technology

-0.02

Correlation Coefficient

Bristol Myers  Micron Technology

Good diversification

The 3 months correlation between Bristol and Micron is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Bristol Myers i.e., Bristol Myers and Micron Technology go up and down completely randomly.

Pair Corralation between Bristol Myers and Micron Technology

Assuming the 90 days trading horizon Bristol Myers Squibb is expected to generate 0.58 times more return on investment than Micron Technology. However, Bristol Myers Squibb is 1.71 times less risky than Micron Technology. It trades about 0.14 of its potential returns per unit of risk. Micron Technology is currently generating about 0.04 per unit of risk. If you would invest  29,250  in Bristol Myers Squibb on October 11, 2024 and sell it today you would earn a total of  5,569  from holding Bristol Myers Squibb or generate 19.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Bristol Myers Squibb  vs.  Micron Technology

Bristol Myers Squibb

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bristol Myers sustained solid returns over the last few months and may actually be approaching a breakup point.

Micron Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bristol Myers and Micron Technology

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

The idea behind Bristol Myers Squibb and Micron Technology 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.