Correlation Between Bristol-Myers Squibb and COVER

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

Diversification Opportunities for Bristol-Myers Squibb and COVER

0.61

Correlation Coefficient

Bristol-Myers Squibb  COVER

Poor diversification

The 3 months correlation between Bristol-Myers and COVER is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and COVER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVER 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 COVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVER has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and COVER go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and COVER

Assuming the 90 days horizon Bristol-Myers Squibb is expected to generate 1.6 times less return on investment than COVER. In addition to that, Bristol-Myers Squibb is 1.22 times more volatile than COVER. It trades about 0.22 of its total potential returns per unit of risk. COVER is currently generating about 0.42 per unit of volatility. If you would invest  1,220  in COVER on September 1, 2024 and sell it today you would earn a total of  488.00  from holding COVER or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.96%
Values	Daily Returns

Bristol Myers Squibb  vs.  COVER

Bristol Myers Squibb

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 9 (%) 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.

COVER

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COVER are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, COVER reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol-Myers Squibb and COVER

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

The idea behind Bristol Myers Squibb and COVER 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.