Correlation Between Bristol-Myers Squibb and Alphabet

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

Diversification Opportunities for Bristol-Myers Squibb and Alphabet

0.39

Correlation Coefficient

Bristol-Myers Squibb  Alphabet

Weak diversification

The 3 months correlation between Bristol-Myers and Alphabet is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Alphabet go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and Alphabet

Assuming the 90 days horizon Bristol Myers Squibb is expected to under-perform the Alphabet. In addition to that, Bristol-Myers Squibb is 1.74 times more volatile than Alphabet Inc Class C. It trades about -0.06 of its total potential returns per unit of risk. Alphabet Inc Class C is currently generating about -0.02 per unit of volatility. If you would invest  17,589  in Alphabet Inc Class C on December 4, 2024 and sell it today you would lose (723.00) from holding Alphabet Inc Class C or give up 4.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	40.68%
Values	Daily Returns

Bristol Myers Squibb  vs.  Alphabet Inc Class C

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.

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bristol-Myers Squibb and Alphabet

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

The idea behind Bristol Myers Squibb and Alphabet Inc Class C 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.