Correlation Between KKR Co and Bristol Myers

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

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

Diversification Opportunities for KKR Co and Bristol Myers

0.87

Correlation Coefficient

KKR Co  Bristol Myers

Very poor diversification

The 3 months correlation between KKR and Bristol is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP 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 KKR Co 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 KKR Co LP 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 KKR Co i.e., KKR Co and Bristol Myers go up and down completely randomly.

Pair Corralation between KKR Co and Bristol Myers

Considering the 90-day investment horizon KKR Co LP is expected to generate 1.3 times more return on investment than Bristol Myers. However, KKR Co is 1.3 times more volatile than Bristol Myers Squibb. It trades about 0.13 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about -0.01 per unit of risk. If you would invest  4,587  in KKR Co LP on September 22, 2024 and sell it today you would earn a total of  10,171  from holding KKR Co LP or generate 221.74% return on investment over 90 days.

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

KKR Co LP  vs.  Bristol Myers Squibb

KKR Co LP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. In spite of fairly uncertain primary indicators, Bristol Myers showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KKR Co and Bristol Myers

The main advantage of trading using opposite KKR Co and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KKR Co 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 KKR Co LP 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.