Correlation Between Bristol-Myers Squibb and Legacy Education

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

Diversification Opportunities for Bristol-Myers Squibb and Legacy Education

-0.28

Correlation Coefficient

Bristol-Myers Squibb  Legacy Education

Very good diversification

The 3 months correlation between Bristol-Myers and Legacy is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education 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 Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Legacy Education go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and Legacy Education

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 0.86 times more return on investment than Legacy Education. However, Bristol Myers Squibb is 1.16 times less risky than Legacy Education. It trades about 0.06 of its potential returns per unit of risk. Legacy Education is currently generating about -0.02 per unit of risk. If you would invest  93,474  in Bristol Myers Squibb on December 28, 2024 and sell it today you would earn a total of  6,526  from holding Bristol Myers Squibb or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.3%
Values	Daily Returns

Bristol Myers Squibb  vs.  Legacy Education

Bristol Myers Squibb

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol-Myers Squibb reported solid returns over the last few months and may actually be approaching a breakup point.

Legacy Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Legacy Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Legacy Education is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bristol-Myers Squibb and Legacy Education

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

The idea behind Bristol Myers Squibb and Legacy Education 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.