Correlation Between Bristol-Myers Squibb and Amazon

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

Diversification Opportunities for Bristol-Myers Squibb and Amazon

-0.45

Correlation Coefficient

Bristol-Myers Squibb  Amazon

Very good diversification

The 3 months correlation between Bristol-Myers and Amazon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Bristol-Myers Squibb 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Amazon go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and Amazon

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 2.24 times more return on investment than Amazon. However, Bristol-Myers Squibb is 2.24 times more volatile than Amazon Inc. It trades about 0.06 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.12 per unit of risk. If you would invest  93,474  in Bristol Myers Squibb on December 28, 2024 and sell it today you would earn a total of  6,526  from holding Bristol Myers Squibb or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	62.3%
Values	Daily Returns

Bristol Myers Squibb  vs.  Amazon Inc

Bristol Myers Squibb

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol-Myers Squibb reported solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic 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 Squibb and Amazon

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

The idea behind Bristol Myers Squibb and Amazon Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.