Correlation Between Bristol Myers and Lifeist Wellness

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

Diversification Opportunities for Bristol Myers and Lifeist Wellness

-0.54

Correlation Coefficient

Bristol Myers  Lifeist Wellness

Excellent diversification

The 3 months correlation between Bristol and Lifeist is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Lifeist Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeist Wellness 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 Lifeist Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeist Wellness has no effect on the direction of Bristol Myers i.e., Bristol Myers and Lifeist Wellness go up and down completely randomly.

Pair Corralation between Bristol Myers and Lifeist Wellness

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 0.25 times more return on investment than Lifeist Wellness. However, Bristol Myers Squibb is 4.01 times less risky than Lifeist Wellness. It trades about 0.07 of its potential returns per unit of risk. Lifeist Wellness is currently generating about -0.04 per unit of risk. If you would invest  90,000  in Bristol Myers Squibb on October 12, 2024 and sell it today you would earn a total of  9,889  from holding Bristol Myers Squibb or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bristol Myers Squibb  vs.  Lifeist Wellness

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.

Lifeist Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifeist Wellness has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bristol Myers and Lifeist Wellness

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

The idea behind Bristol Myers Squibb and Lifeist Wellness 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..