Correlation Between Connect Biopharma and Bristol Myers

Can any of the company-specific risk be diversified away by investing in both Connect Biopharma and Bristol Myers 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 Connect Biopharma and Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Connect Biopharma Holdings and Bristol Myers Squibb, you can compare the effects of market volatilities on Connect Biopharma and Bristol Myers 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 Connect Biopharma with a short position of Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connect Biopharma and Bristol Myers.

Diversification Opportunities for Connect Biopharma and Bristol Myers

-0.53

Correlation Coefficient

Connect Biopharma  Bristol Myers

Excellent diversification

The 3 months correlation between Connect and Bristol is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and Bristol Myers go up and down completely randomly.

Pair Corralation between Connect Biopharma and Bristol Myers

Given the investment horizon of 90 days Connect Biopharma Holdings is expected to under-perform the Bristol Myers. In addition to that, Connect Biopharma is 2.63 times more volatile than Bristol Myers Squibb. It trades about -0.22 of its total potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.07 per unit of volatility. If you would invest  5,545  in Bristol Myers Squibb on December 29, 2024 and sell it today you would earn a total of  345.00  from holding Bristol Myers Squibb or generate 6.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Connect Biopharma Holdings  vs.  Bristol Myers Squibb

Connect Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic 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.

Bristol Myers Squibb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Bristol Myers may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Connect Biopharma and Bristol Myers

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

The idea behind Connect Biopharma Holdings and Bristol Myers Squibb 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.