Correlation Between Bristol Myers and Meta Platforms

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

Diversification Opportunities for Bristol Myers and Meta Platforms

0.35

Correlation Coefficient

Bristol Myers  Meta Platforms

Weak diversification

The 3 months correlation between Bristol and Meta is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Bristol Myers i.e., Bristol Myers and Meta Platforms go up and down completely randomly.

Pair Corralation between Bristol Myers and Meta Platforms

Assuming the 90 days horizon Bristol Myers Squibb is expected to under-perform the Meta Platforms. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bristol Myers Squibb is 1.52 times less risky than Meta Platforms. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Meta Platforms is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  58,482  in Meta Platforms on September 13, 2024 and sell it today you would earn a total of  4,786  from holding Meta Platforms or generate 8.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Bristol Myers Squibb  vs.  Meta Platforms

Bristol Myers Squibb

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 11 (%) 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.

Meta Platforms

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bristol Myers and Meta Platforms

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

The idea behind Bristol Myers Squibb and Meta Platforms 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.