Correlation Between Bristol-Myers Squibb and Vornado Realty

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

Diversification Opportunities for Bristol-Myers Squibb and Vornado Realty

-0.48

Correlation Coefficient

Bristol-Myers Squibb  Vornado Realty

Very good diversification

The 3 months correlation between Bristol-Myers and Vornado is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myers Squibb and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust 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 Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of Bristol-Myers Squibb i.e., Bristol-Myers Squibb and Vornado Realty go up and down completely randomly.

Pair Corralation between Bristol-Myers Squibb and Vornado Realty

Assuming the 90 days horizon Bristol Myers Squibb is expected to generate 3.36 times more return on investment than Vornado Realty. However, Bristol-Myers Squibb is 3.36 times more volatile than Vornado Realty Trust. It trades about 0.04 of its potential returns per unit of risk. Vornado Realty Trust is currently generating about 0.04 per unit of risk. If you would invest  84,641  in Bristol Myers Squibb on October 2, 2024 and sell it today you would earn a total of  15,248  from holding Bristol Myers Squibb or generate 18.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.84%
Values	Daily Returns

Bristol Myers Squibb  vs.  Vornado Realty Trust

Bristol Myers Squibb

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 9 (%) 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.

Vornado Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vornado Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Vornado Realty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bristol-Myers Squibb and Vornado Realty

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

The idea behind Bristol Myers Squibb and Vornado Realty Trust 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..