Correlation Between Elevance Health, and Bristol Myers

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

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

Diversification Opportunities for Elevance Health, and Bristol Myers

0.14

Correlation Coefficient

Elevance Health,  Bristol Myers

Average diversification

The 3 months correlation between Elevance and Bristol is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health, 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 Elevance Health, 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 Elevance Health, 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 Elevance Health, i.e., Elevance Health, and Bristol Myers go up and down completely randomly.

Pair Corralation between Elevance Health, and Bristol Myers

Assuming the 90 days trading horizon Elevance Health, is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, Elevance Health, is 1.44 times less risky than Bristol Myers. The stock trades about -0.09 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  35,223  in Bristol Myers Squibb on December 26, 2024 and sell it today you would lose (1,283) from holding Bristol Myers Squibb or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Elevance Health,  vs.  Bristol Myers Squibb

Elevance Health,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elevance Health, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. Despite somewhat strong basic indicators, Bristol Myers is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elevance Health, and Bristol Myers

The main advantage of trading using opposite Elevance Health, and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elevance Health, 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 Elevance Health, 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 Transaction History module to view history of all your transactions and understand their impact on performance.