Correlation Between Bristol Myers and Global Partners

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

Diversification Opportunities for Bristol Myers and Global Partners

0.87

Correlation Coefficient

Bristol Myers  Global Partners

Very poor diversification

The 3 months correlation between Bristol and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Bristol Myers i.e., Bristol Myers and Global Partners go up and down completely randomly.

Pair Corralation between Bristol Myers and Global Partners

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 7.55 times more return on investment than Global Partners. However, Bristol Myers is 7.55 times more volatile than Global Partners LP. It trades about 0.12 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.03 per unit of risk. If you would invest  95,555  in Bristol Myers Squibb on October 1, 2024 and sell it today you would earn a total of  4,334  from holding Bristol Myers Squibb or generate 4.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Bristol Myers Squibb  vs.  Global Partners LP

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 reported solid returns over the last few months and may actually be approaching a breakup point.

Global Partners LP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bristol Myers and Global Partners

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

The idea behind Bristol Myers Squibb and Global Partners LP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.