Correlation Between Bristol-Myers Squibb and NVIDIA

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

Diversification Opportunities for Bristol-Myers Squibb and NVIDIA

-0.45

Correlation Coefficient

Bristol-Myers Squibb  NVIDIA

Very good diversification

The 3 months correlation between Bristol-Myers and NVIDIA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and NVIDIA go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and NVIDIA

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 0.92 times more return on investment than NVIDIA. However, Bristol Myers Squibb is 1.08 times less risky than NVIDIA. It trades about -0.06 of its potential returns per unit of risk. NVIDIA is currently generating about -0.08 per unit of risk. If you would invest  96,551  in Bristol Myers Squibb on December 4, 2024 and sell it today you would lose (6,496) from holding Bristol Myers Squibb or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	40.68%
Values	Daily Returns

Bristol Myers Squibb  vs.  NVIDIA

Bristol Myers Squibb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bristol Myers Squibb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bristol-Myers Squibb and NVIDIA

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

The idea behind Bristol Myers Squibb and NVIDIA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.