Correlation Between Bristol Myers and Annaly Capital

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

Diversification Opportunities for Bristol Myers and Annaly Capital

0.72

Correlation Coefficient

Bristol Myers  Annaly Capital

Poor diversification

The 3 months correlation between Bristol and Annaly is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Annaly Capital Management, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Manag 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Manag has no effect on the direction of Bristol Myers i.e., Bristol Myers and Annaly Capital go up and down completely randomly.

Pair Corralation between Bristol Myers and Annaly Capital

Assuming the 90 days trading horizon Bristol Myers Squibb is expected to generate 1.68 times more return on investment than Annaly Capital. However, Bristol Myers is 1.68 times more volatile than Annaly Capital Management,. It trades about 0.05 of its potential returns per unit of risk. Annaly Capital Management, is currently generating about 0.01 per unit of risk. If you would invest  35,064  in Bristol Myers Squibb on October 6, 2024 and sell it today you would earn a total of  528.00  from holding Bristol Myers Squibb or generate 1.51% return on investment over 90 days.

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

Bristol Myers Squibb  vs.  Annaly Capital Management,

Bristol Myers Squibb

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Bristol Myers sustained solid returns over the last few months and may actually be approaching a breakup point.

Annaly Capital Manag

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Annaly Capital Management, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak essential indicators, Annaly Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Annaly Capital

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

The idea behind Bristol Myers Squibb and Annaly Capital Management, 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.