Correlation Between Bristol Myers and Industria

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

Diversification Opportunities for Bristol Myers and Industria

-0.66

Correlation Coefficient

Bristol Myers  Industria

Excellent diversification

The 3 months correlation between Bristol and Industria is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Industria de Diseo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseo 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 Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseo has no effect on the direction of Bristol Myers i.e., Bristol Myers and Industria go up and down completely randomly.

Pair Corralation between Bristol Myers and Industria

Assuming the 90 days horizon Bristol Myers Squibb is expected to under-perform the Industria. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bristol Myers Squibb is 1.12 times less risky than Industria. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Industria de Diseo is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,171  in Industria de Diseo on October 13, 2024 and sell it today you would earn a total of  81.00  from holding Industria de Diseo or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.36%
Values	Daily Returns

Bristol Myers Squibb  vs.  Industria de Diseo

Bristol Myers Squibb

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol Myers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bristol Myers and Industria

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

The idea behind Bristol Myers Squibb and Industria de Diseo 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.