Correlation Between Bristol Myers and BANDAI NAMCO

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

Diversification Opportunities for Bristol Myers and BANDAI NAMCO

-0.31

Correlation Coefficient

Bristol Myers  BANDAI NAMCO

Very good diversification

The 3 months correlation between Bristol and BANDAI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Bristol Myers i.e., Bristol Myers and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Bristol Myers and BANDAI NAMCO

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 1.72 times more return on investment than BANDAI NAMCO. However, Bristol Myers is 1.72 times more volatile than BANDAI NAMCO Holdings. It trades about 0.14 of its potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.0 per unit of risk. If you would invest  73,550  in Bristol Myers Squibb on September 13, 2024 and sell it today you would earn a total of  22,005  from holding Bristol Myers Squibb or generate 29.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Bristol Myers Squibb  vs.  BANDAI NAMCO Holdings

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.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANDAI NAMCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, BANDAI NAMCO 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 BANDAI NAMCO

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

The idea behind Bristol Myers Squibb and BANDAI NAMCO Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.