Correlation Between Bristol Myers and Hafnia

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

Diversification Opportunities for Bristol Myers and Hafnia

0.69

Correlation Coefficient

Bristol Myers  Hafnia

Poor diversification

The 3 months correlation between Bristol and Hafnia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Bristol Myers i.e., Bristol Myers and Hafnia go up and down completely randomly.

Pair Corralation between Bristol Myers and Hafnia

Assuming the 90 days horizon Bristol Myers is expected to generate 12.32 times less return on investment than Hafnia. In addition to that, Bristol Myers is 1.61 times more volatile than Hafnia Limited. It trades about 0.0 of its total potential returns per unit of risk. Hafnia Limited is currently generating about 0.08 per unit of volatility. If you would invest  473.00  in Hafnia Limited on October 11, 2024 and sell it today you would earn a total of  357.00  from holding Hafnia Limited or generate 75.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.14%
Values	Daily Returns

Bristol Myers Squibb  vs.  Hafnia Limited

Bristol Myers Squibb

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 5 (%) 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.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bristol Myers and Hafnia

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

The idea behind Bristol Myers Squibb and Hafnia Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.