Correlation Between Bristol-Myers Squibb and AstraZeneca PLC

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

Diversification Opportunities for Bristol-Myers Squibb and AstraZeneca PLC

0.11

Correlation Coefficient

Bristol-Myers Squibb  AstraZeneca PLC

Average diversification

The 3 months correlation between Bristol-Myers and AstraZeneca is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and AstraZeneca PLC

Assuming the 90 days horizon Bristol Myers Squibb is expected to under-perform the AstraZeneca PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bristol Myers Squibb is 1.21 times less risky than AstraZeneca PLC. The pink sheet trades about -0.13 of its potential returns per unit of risk. The AstraZeneca PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  14,190  in AstraZeneca PLC on December 5, 2024 and sell it today you would earn a total of  1,126  from holding AstraZeneca PLC or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Bristol Myers Squibb  vs.  AstraZeneca PLC

Bristol Myers Squibb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AstraZeneca PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, AstraZeneca PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol-Myers Squibb and AstraZeneca PLC

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

The idea behind Bristol Myers Squibb and AstraZeneca PLC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.