Correlation Between Bristol Myers and KGHM Polska

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

Diversification Opportunities for Bristol Myers and KGHM Polska

0.79

Correlation Coefficient

Bristol Myers  KGHM Polska

Poor diversification

The 3 months correlation between Bristol and KGHM is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz 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 KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Bristol Myers i.e., Bristol Myers and KGHM Polska go up and down completely randomly.

Pair Corralation between Bristol Myers and KGHM Polska

Assuming the 90 days horizon Bristol Myers is expected to generate 9.45 times less return on investment than KGHM Polska. But when comparing it to its historical volatility, Bristol Myers Squibb is 1.33 times less risky than KGHM Polska. It trades about 0.03 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,580  in KGHM Polska Miedz on September 21, 2024 and sell it today you would earn a total of  1,309  from holding KGHM Polska Miedz or generate 50.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	16.99%
Values	Daily Returns

Bristol Myers Squibb  vs.  KGHM Polska Miedz

Bristol Myers Squibb

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 12 (%) 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.

KGHM Polska Miedz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGHM Polska Miedz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KGHM Polska 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 KGHM Polska

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

The idea behind Bristol Myers Squibb and KGHM Polska Miedz 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.