Correlation Between Bristol Myers and Brightsphere Investment

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

Diversification Opportunities for Bristol Myers and Brightsphere Investment

0.82

Correlation Coefficient

Bristol Myers  Brightsphere Investment

Very poor diversification

The 3 months correlation between Bristol and Brightsphere is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Brightsphere Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightsphere Investment 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 Brightsphere Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightsphere Investment has no effect on the direction of Bristol Myers i.e., Bristol Myers and Brightsphere Investment go up and down completely randomly.

Pair Corralation between Bristol Myers and Brightsphere Investment

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 1.54 times more return on investment than Brightsphere Investment. However, Bristol Myers is 1.54 times more volatile than Brightsphere Investment Group. It trades about 0.0 of its potential returns per unit of risk. Brightsphere Investment Group is currently generating about -0.45 per unit of risk. If you would invest  100,555  in Bristol Myers Squibb on September 23, 2024 and sell it today you would lose (666.00) from holding Bristol Myers Squibb or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Bristol Myers Squibb  vs.  Brightsphere Investment Group

Bristol Myers Squibb

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol Myers reported solid returns over the last few months and may actually be approaching a breakup point.

Brightsphere Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Brightsphere Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bristol Myers and Brightsphere Investment

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

The idea behind Bristol Myers Squibb and Brightsphere Investment Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.